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Reduction in the Long-Term Unemployment of the Elderly: A Success Story from Finland

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  • Tomi Kyyrä
  • Ralf Wilke

Abstract

In Finland the elderly unemployed are allowed to collect unemployment benefits up to the age of 60, when they can retire via a particular unemployment pension. In 1997 the eligibility age of persons benefiting from this scheme was raised from 53 to 55. We consider layo􀀞 risks, unemployment durations, and the exit states before and after the reform. In the duration analysis a flexible treatment design is adopted by allowing for quantile treatment e􀀞ects. We apply three di􀀞erent non- and semiparametric methods, which all produce robust and coherent results. Since the reform the group aged 53-54 has had a lower risk of unemployment, shorter unemployment durations, and higher exit rates to employment, and it is no longer distinguishable from the group aged 50-52. We compute the expected saving in unemployment benefits in the private sector due to the reform and find that it is in the range of 100 million euros per age cohort.

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Bibliographic Info

Paper provided by Government Institute for Economic Research Finland (VATT) in its series Discussion Papers with number 346.

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Date of creation: 15 Oct 2004
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Handle: RePEc:fer:dpaper:346

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Keywords: Unemployment insurance reform; quantile treatment effect; non- and semiparametric methods; Finnish register data.;

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References

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  1. Erkki Koskela & Roope Uusitalo, 2003. "The Un-Intended Convergence: How the Finnish Unemployment Reached the European Level," CESifo Working Paper Series 878, CESifo Group Munich.
  2. Arnott, Richard J & Hosios, Arthur J & Stiglitz, Joseph E, 1988. "Implicit Contracts, Labor Mobility, and Unemployment," American Economic Review, American Economic Association, vol. 78(5), pages 1046-66, December.
  3. Carling, Kenneth & Holmlund, Bertil & Vejsiu, Altin, 1999. "Do benefit cuts boost job findings? Swedish evidence from the 1990s," Working Paper Series 1999:8, IFAU - Institute for Evaluation of Labour Market and Education Policy.
  4. Xuan, Zhang & Wilke, Ralf A. & Lüdemann, Elke, 2005. "Censored Quantile Regressions and the Length of Unemployment Periods in West Germany," ZEW Discussion Papers 04-57 [rev.], ZEW - Zentrum für Europäische Wirtschaftsforschung / Center for European Economic Research.
  5. Roger Koenker & Zhijie Xiao, 2002. "Inference on the Quantile Regression Process," Econometrica, Econometric Society, vol. 70(4), pages 1583-1612, July.
  6. Hunt, Jennifer, 1995. "The Effect of Unemployment Compensation on Unemployment Duration in Germany," Journal of Labor Economics, University of Chicago Press, vol. 13(1), pages 88-120, January.
  7. Pasi Holm & Tomi Kyyrä & Juha Rantala, 1999. "Household Level Economic Incentives, Unemployment Trap and Job Finding Probability," International Tax and Public Finance, Springer, vol. 6(3), pages 361-378, August.
  8. Bruce D. Meyer, 1991. "Unemployment Insurance And Unemployment Spells," NBER Working Papers 2546, National Bureau of Economic Research, Inc.
  9. Yannis Bilias & Roger Koenker, 2001. "Quantile regression for duration data: A reappraisal of the Pennsylvania Reemployment Bonus Experiments," Empirical Economics, Springer, vol. 26(1), pages 199-220.
  10. Heckman, James & Singer, Burton, 1984. "A Method for Minimizing the Impact of Distributional Assumptions in Econometric Models for Duration Data," Econometrica, Econometric Society, vol. 52(2), pages 271-320, March.
  11. Han, Aaron & Hausman, Jerry A, 1990. "Flexible Parametric Estimation of Duration and Competing Risk Models," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 5(1), pages 1-28, January-M.
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