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Benefit Entitlement and the Labor Market: Evidence from a Large-Scale Policy Change

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Author Info
Lalive, Rafael (University of Zurich, CESifo and IZA, Bonn)
Zweimüller, Josef () (University of Zurich, CESifo, CEPR and IZA, Bonn)

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Abstract

This paper analyzes the impact of the Austrian Regional Extended Benefit Program (REBP) on the labor market outcomes for elderly workers in Austria. The REBP extended entitlement to regular unemployment benefits from 30 weeks to a maximum of 209 weeks for elderly individuals in certain regions. This policy change created a large-scale quasi-experimental situation from which a lot can be learned about the impact of unemployment insurance rules on the dynamics of employment, unemployment, and wages. We find that the REBP led to a tremendous increase in unemployment, which was due to both an increase in the inflow to and the outflow from unemployment. The REBP also induced a strong increase in early retirement and in many cases, in particular for steel workers, entering unemployment meant withdrawal from the labor force. Finally, we show that there were also non-negligible effects of extended benefits on the level and the distribution of wages.

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Publisher Info
Paper provided by Institute for the Study of Labor (IZA) in its series IZA Discussion Papers with number 444.

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Length: 47 pages
Date of creation: Feb 2002
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Handle: RePEc:iza:izadps:dp444

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Related research
Keywords: Quasi-experiments; maximum benefit duration; unemployment inflow; duration of unemployment; early retirement; earnings; inequality;

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Find related papers by JEL classification:
C41 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods: Special Topics - - - Duration Analysis
J64 - Labor and Demographic Economics - - Mobility, Unemployment, and Vacancies - - - Unemployment: Models, Duration, Incidence, and Job Search
J65 - Labor and Demographic Economics - - Mobility, Unemployment, and Vacancies - - - Unemployment Insurance; Severance Pay; Plant Closings

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References listed on IDEAS
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Full references

Cited by:
(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. Lalive, Rafael & van Ours, Jan C. & Zweimueller, Josef, 2004. "How Changes in Financial Incentives Affect the Duration of Unemployment," IZA Discussion Papers 1363, Institute for the Study of Labor (IZA). [Downloadable!]
    Other versions:
  2. Rafael Lalive, 2006. "How do Extended Benefits affect Unemployment Duration? A Regression Discontinuity Approach," IEW - Working Papers iewwp294, Institute for Empirical Research in Economics - IEW. [Downloadable!]
    Other versions:
  3. Rafael Lalive & Josef Zweimüller, . "Benefit Entitlement and Unemployment Duration - The Role of Policy Endogeneity," IEW - Working Papers iewwp112, Institute for Empirical Research in Economics - IEW. [Downloadable!]
    Other versions:
  4. Björn Christensen, 2003. "Die Reform der Arbeitslosenversicherung im Zuge der Agenda 2010 und ihr Einfluss auf die Arbeitslosigkeitsdauer — Simulationsergebnisse auf Basis der nicht-stationären Suchtheorie," Kiel Working Papers 1171, Kiel Institute for the World Economy. [Downloadable!]
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