Unemployment Benefits and the Duration of Unemployment in East Germany

This paper studies the impact of unemployment benefits on
unemployment duration for East Germany using data from the German
Socio-Economic Panel. It concentrates on exit from unemployment
into employment. Estimation results of a discrete-time hazard rate
model imply that moderate cuts in the replacement rate raise the
hazards by little. The effect of the replacement rate on the
hazards becomes weaker the longer people are unemployed. The threat
of periods of benefit sanction could explain this. The hazards are
not generally declining in time until exhausting unemployment
insurance (UI) benefits, but rise just prior to exhausting UI.