Does marginal employment promote regular employment for unemployed welfare benefit recipients in Germany?

Marginal employment (ME) is one of the largest forms of atypical employment in Germany. In this study, we analyse whether ME has a "stepping stone" function for unemployed individuals, i.e., whether ME increases the subsequent probability of regular employment. Our study adds to the literature in the following ways. First, compared to previous studies, it analyses the "stepping stone" function for a more recent time period, i.e., after Germany's major labour-market reforms (Hartz reforms) at the beginning of the 2000s. Second, we use a new administrative data source which includes previously unavailable information on desired labour supply and household composition. Third, we follow recent methodological developments in the evaluation literature by applying a dynamic evaluation approach that has not previously been used to analyse marginal employment. Our results for single and childless unemployment benefit-II recipients highlight the importance of the dynamic approach: We find differing treatment effects by unemployment duration. According to our results, marginal employment does increase the likelihood of regular employment within a three-year observation period only for those unemployed who take up ME several months after beginning to receive benefits. In contrast, for those starting ME within the first months of receiving benefits, there is no effect on the probability of regular employment.