The dissertation consists of two main parts. The first part presents a search model with non-stationary reservation wages. In the model the reservation wage declines over time and at a certain point is equal to utility of non-participation, after which it is not optimal to search and workers...

The German government introduced in 2005 a fundamental labor market reform, which emphasizes the activation of unemployed welfare recipients. A variety of active labor market policies (ALMPs) should help the unemployed find a job or increase their employability. One important activation program...