Essays on the Economics of Social Insurance and Labor Markets

Abstract

This dissertation investigates the labor market and fiscal consequences of social insurance reforms, drawing on large-scale administrative data from Germany. Across three chapters, I examine how programs designed to insure against economic risk - whether through wage subsidies, public insurance expansions, or regulatory wage floors - affect employment, workforce composition, and broader economic outcomes. The first chapter analyzes the employment effects of Germany’s Short-Time Work (Kurzarbeit) program during the COVID-19 crisis. Using matched administrative data on program participation and the universe of Social Security records, I show that while Short-Time Work mitigated immediate job losses in 2020, participating firms experienced persistently lower employment growth through 2022. Instrumental variables estimates suggest that extensive program use led to substantial job hoarding, merely delaying, but not averting, adjustments. These findings highlight the short-run benefits and long-run costs of broad-based job retention subsidies. The second chapter evaluates the impact of Germany’s 2022 Healthcare Development Act, which introduced wage floors in long-term care (LTC). Using a difference-in-differences design comparing LTC nurses to hospital nurses, I find that the reform raised wages particularly at the bottom, without reducing employment or firm entry. Wage compression resulted from both genuine wage gains and positive selection, as lower-paid workers were more likely to exit and newly hired staff experienced accelerated wage growth. The third chapter studies the long-run labor market effects of Germany’s 1995 introduction of universal LTC insurance. Leveraging regional variation in pre-reform coverage and rich individual work histories, I show that the insurance expansion spurred large-scale job creation in nursing homes without displacing employment in other sectors. Employment gains were concentrated among lower-skilled workers, and local unemployment declined. A structural model reveals that the fiscal and welfare effects depend critically on pre-existing labor market frictions and tax wedges, with the reform effectively paying for itself through fiscal spillovers. Together, these studies offer empirical evidence on how well-designed social insurance programs can support vulnerable workers, stimulate labor demand, and shape earnings distributions, underscoring the importance of targeting and institutional context for ensuring long-run efficiency.