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

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  • Tomi Kyyrä
  • Ralf A. Wilke

Abstract

In several European countries the elderly unemployed are allowed to collect unemployment benefits up to a certain age limit, after which they can retire via some early retirement scheme. In Finland the eligibility age of persons benefiting from this kind of scheme was raised from 53 to 55 in 1997. We consider layoff 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 effects. 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 almost indistinguishable from the group aged 50-52. We estimate that the amount of unemployment benefits saved due to the reform is close to 100 million euros for each age cohort turning 53.

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Bibliographic Info

Paper provided by Government Institute for Economic Research Finland (VATT) in its series Discussion Papers with number 396.

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Date of creation: 28 Jun 2006
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Handle: RePEc:fer:dpaper:396

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Keywords: Unemployment insurance reform; quantile treatment effect; duration analysis; Finnish register data;

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  1. 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.
  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. Romain Duval, 2003. "The Retirement Effects of Old-Age Pension and Early Retirement Schemes in OECD Countries," OECD Economics Department Working Papers 370, OECD Publishing.
  4. Lalive, Rafael & Zweimüller, Josef, 2002. "Benefit Entitlement and Unemployment Duration: The Role of Policy Endogeneity," CEPR Discussion Papers 3363, C.E.P.R. Discussion Papers.
  5. Bernd Fitzenberger & Ralf A. Wilke, 2010. "Unemployment Durations in West Germany Before and After the Reform of the Unemployment Compensation System during the 1980s," German Economic Review, Verein für Socialpolitik, vol. 11, pages 336-366, 08.
  6. 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.
  7. Abbring, Jaap H., 2002. "Stayers versus defecting movers: a note on the identification of defective duration models," Economics Letters, Elsevier, vol. 74(3), pages 327-331, February.
  8. 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.
  9. Elke Lüdemann & Ralf Wilke & Xuan Zhang, 2006. "Censored quantile regressions and the length of unemployment periods in West Germany," Empirical Economics, Springer, vol. 31(4), pages 1003-1024, November.
  10. Maarten Lindeboom, 1998. "Microeconometric Analysis of the Retirement Decision: The Netherlands," OECD Economics Department Working Papers 207, OECD Publishing.
  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.
  12. Jennifer Hunt, 1992. "The Effect of Unemployment Compensation on Unemployment Duration in Germany," Discussion Papers of DIW Berlin 50, DIW Berlin, German Institute for Economic Research.
  13. Gruber, Jonathan & Wise, David, 1998. "Social Security and Retirement: An International Comparison," American Economic Review, American Economic Association, vol. 88(2), pages 158-63, May.
  14. John T. Addison & Pedro Portugal, 2003. "Unemployment Duration Competing and Defective Risks," Journal of Human Resources, University of Wisconsin Press, vol. 38(1).
  15. Tuulia Hakola & Roope Uusitalo, 2001. "Let's Make a Deal - the Impact of Social Security Provisions and Firm Liabilities on Early Retirement," Discussion Papers 260, Government Institute for Economic Research Finland (VATT).
  16. Meyer, Bruce D, 1990. "Unemployment Insurance and Unemployment Spells," Econometrica, Econometric Society, vol. 58(4), pages 757-82, July.
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