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The paper aims to present an analysis of the indirect and direct effects of active labour market policy measures at the regional level for Western Germany.

Most evaluation studies of active labour market policy focus on the microeconometric treatment effect using individual data and do not account for possible indirect effects like deadweight and substitution effects. The present study uses a dynamic specification of the augmented matching function at the regional level. A dynamic panel data model is estimated using monthly and regional variation of different labour market programmes as explanatory variables. Furthermore, spatial interactions are taken into account by adding a spatially correlated error term.

Almost no significant negative effects are found of the stock of participants in programmes of labour market policy on the number of outflows from unemployment into regular jobs. Thus, contrary to findings at the individual level, no lock‐in effect is found. The number of programme participants does not reduce the number of outflows from unemployment. On the other hand when looking not at the stocks but on the outflows from programmes, no positive effects on outflows from unemployment at the regional level are found.

Because of data limitations only a period up to six months after completing a programme is used.

The authors distinguish between the effects of the stock of programme participants and of the outflows from programmes. Furthermore, the authors account for spatially correlated error terms by using a GM estimator proposed by Mutl in 2006.

International immigration affects the degree of cultural diversity present in a labour force. The purpose of this paper is to focus on the consequences of immigration with respect to the level of cultural diversity by estimating employment functions for individual establishments.

The theory behind the empirical analyses is based on a “turned around” new economic geography model. The data basis used is a linked employer – employee data set generated by a fusion of the IAB Establishment Panel with the Employment Statistics of Germany, which provides very detailed information about individual workers and establishments. In the empirical part instrumental variables techniques are employed to solve the endogeneity issues involved.

In the empirical analyses it is shown that employment is lower when the degree of diversity is higher, regarding the revenue of an individual establishment as given. From this result it can be derived under the conditions of monopolistic competition (implying elastic product demand) that the establishment is able to occupy a relatively large part of the market. Finally, this implies relatively high labour demand.

The paper provides clear evidence that cultural diversity in single establishments enhance productivity. The question remains whether different employees interact each another or whether they are separated to different tasks within the establishment. In the latter case productivity gains are due to task-specific knowledge whereas in the former one the interaction of different cultures matters. This issue cannot be answered with the given data set.

Negative effects emerging from employing various cultures (such as language barriers) can be compensated. Thus, hiring foreign born workers does not mean a decline in productivity and a loss in competitiveness.

This paper aims to introduce a new large‐scale panel study (“PASS”) for research on the labour market, the welfare state and poverty that combines a sample of 6,000 recipient households with an equally large sample of the general population.

The authors show how research goals and the specific population of the survey are accounted for in a tailored survey design.

The authors point the reader to new research potential created by the new study. The new potential is mainly derived from the sampling design (large recipient sample combined with a population sample), the direct measurement of poverty by a deprivation index, the detailed measurement of the migratory background, additional information (like attitudes, search intensity) for models of recipiency dynamics, and the linkage of the survey data with administrative data.

The data set described fills a major gap in the data‐infrastructure available for labour‐market research. From a methodological point of view it presents an innovative sampling design.

The purpose of the paper is to estimate the effectiveness of two start‐up programs (bridging allowance and start‐up subsidy) in East Germany.

Using a combination of administrative data from the Federal Employment Agency and a follow‐up survey (for roughly 1,300/1,000 participants/non‐participants), the analysis is based on the conditional independence assumption. Kernel matching estimators are applied to estimate the treatment effects and test the sensitivity of the results using a conditional difference‐in‐differences approach.

At the end of the observation period both programs are effective: unemployment rates of participants are lower, and employment rates and personal income are higher when compared to non‐participants. Additionally, first descriptive evidence of the additional employment effects through direct job creation is presented, which is quite significant for the bridging allowance and negligible for participants in the start‐up subsidy.

Participants in the start‐up subsidy are in their third year of participation at the end of the observation period and mostly still receive further support (although at a reduced rate). Therefore, the results for this program have to be treated as preliminary.

In contrast to other active labor market programs that have been evaluated recently (including job‐creation schemes and vocational training programs) this paper finds considerable positive effects for start‐up subsidies. Hence, programs aimed at turning the unemployed into entrepreneurs may be a promising strategy in East Germany.

This is one of the first studies that allows inferences to be drawn about the effectiveness of start‐up programs in East Germany. Most previous studies on the effectiveness of active labour market policies in the Eastern part of Germany neglected these programs.

The paper seeks to analyse the self‐selection of international migrants on observable skills.

Based on an extended version of the Roy model, which considers random migration costs, the authors analyse the self‐selection of migrants on observable skills empirically. For this purpose, the authors employ a new panel data set on the educational attainment of migrants, which covers migration from 143 sending countries into the six main receiving countries in the OECD from 1975 to 2000.

Migrants tend to be positively self‐selected on observable skills, although the inequality in earnings is larger in the sending country relative to the destination countries. The estimation results indicate that a higher inequality in the distribution of earnings in both the receiving and the sending country affects the skill bias of the migrant population favourably. Moreover, higher migration costs and selective immigration policies increase the skill level of migrants relative to those of stayers in the sending countries.

The results may be affected by measurement error, since it was necessary to approximate the returns to education by measures for the inequality of earnings.

The paper provides, inter alia, insights as to how immigration and other policies affect the self‐selection of migrants on observable skills, which may be relevant for policy makers.

To the authors' knowledge, this is the first paper to analyse the self‐selection of migrants on the basis of a panel data set.

Employment protection legislation defines social criteria according to which firms can dismiss workers. If firms evade the law, then negotiation about compensation begins. To reduce the legal and financial uncertainty often associated with ex post bargaining, the German government stipulate severance payments in the case of mutual agreements in law in 2004. This paper aims to examine whether social criteria affect the dismissal probability of workers.

The probability of receiving compensation and the factors determining the amount of severance payment are estimated when it comes to private negotiations about the termination of an employment contract. In addition, the effect of the reform of the employment protection legislation on the probability of receiving compensation and the amount of redundancy pay is analysed. A stepwise estimation strategy is developed to account for sample selection bias when examining which workers receive severance payments and the determinants of severance pay variation. Empirical evidence is provided using German panel data for the period 2000‐2006.

The paper shows that workers protected by law have the lowest probability of being dismissed. The expected severance payment and firm size increase the probability of receiving compensation while the amount of severance payment depends significantly on the way the employment relationship is dissolved. Contrary to the intention of the legislator, the reform increases the level of compensation.

The paper fills a gap in the literature by taking into account selectivity bias when estimating the probability of receiving redundancy pay and the size of compensation. The evidence also provides insights which may be useful for the ongoing discussion to reform employment protection legislation in Germany.

In 1997 minimum wages were introduced in the West and East German construction sector. The purpose of this paper is to analyze their impact on wage growth and employment retention probability of affected workers.

Following a difference‐in‐differences approach the paper proposes a method to identify the effects of this quasi‐experiment despite the lack of information on working hours in the large panel microdata. The method determines the size of the treatment and control group by the maximum likelihood criterion.

All results show positive wage growth effects of the minimum wage regulation in both parts of the country. When it comes to employment effects, the results clearly differ between the two parts of the country. The employment effects are negative for East Germany and positive for West Germany, although the latter are not always statistically significant.

Although there is a limit to the simple transferability of the results for the construction sector to other industries, the study provides some useful insights for this country concerning reactions to the minimum wage. This is the first paper analyzing the effect of minimum wages in Germany using microeconometric methods.

As the minimum wage in the East German construction sector was much higher in relation to the median wage than in West Germany, a tentative conclusion of the different employment results might be that the trade‐off between increasing wages for low‐paid workers and the danger of job losses does not exist in this case if minimum wages are moderate.

This paper provides valuable information on the impact of wage growth and employment retention probability in Germany.

While forms of non‐standard employment (which include part‐time work and temporary employment) have received active promotion in recent years, possible negative effects emerging from these forms of employment have not been high on the agenda. This paper, accordingly, aims to compare workers with non‐standard contracts and those with standard contracts in relation to transitions out of employment into unemployment, inactivity, household/care activities and education/training. Country differences in outcome are expected due to varying regulations of standard and non‐standard employment and different reasons for resorting to forms of non‐standard employment.

The comparison covers four countries, namely Denmark, Germany, the UK and Spain. The segmentation theory is tested by analysing mobility patterns on the basis of the European Community Household Panel data. Event history analysis methods are used. Maximum likelihood multinomial regression models are calculated on the event history data in order to assess competing exits (unemployment, inactivity, household/care and education) between non‐standard and standard workers.

The risk of temporary workers exiting employment is greatest by far in Spain, but also evident in the other countries: casual employment is even more volatile than fixed‐term employment. Concerning part‐time workers, downward transitions to inactivity and/or household/care are much more frequent than among full‐time workers, and this is true even in Spain and Denmark where part‐time employment is not traditionally used to combine work with family activities. The expectation that there would be no differences in exits to unemployment – insofar as employment protection legislation applies to both full‐time and regular part‐time workers – proves true only for Denmark and Germany.

In contrast to most papers on the segmentation potential of non‐standard employment this paper is comparative. Furthermore, it uses event history methods and places a special focus on potentially employability‐enhancing “sideways transitions” to education/training measures.

Assess and compare scarring effects of unemployment in Germany to other countries and to consider firm heterogeneity.

The author uses linked employer-employee data to analyze the effect of unemployment and its duration on future wages in Germany. Using administrative data on workers and firms in Germany and considering registered and unregistered unemployment episodes, the results show long-lasting wage losses caused by unemployment incidences. Furthermore, the estimations indicate that unemployment duration as well as selectivity into firms paying lower wages is of particular relevance for the explanation of wage penalties of re-employed workers.

Unemployment causes massive and persistent wage declines in the future, which depend on the unemployment duration. Furthermore, reduced options of unemployed workers and selectivity in firms contribute to a large part of unemployment scarring.

Findings are relevant for current debates on unemployment and can help design measures to avoid huge costs of unemployment.

This paper analyses long-term unemployment scarring by considering not only unemployment duration but also selectivity in firms and its effect on the scarring effect.