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Benefit Entitlement and Unemployment Duration - The Role of Policy Endogeneity

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  • Rafael Lalive
  • Josef Zweimüller

Abstract

The potential duration of benefits is generally viewed as an important determinant of unemployment duration. This paper evaluates a unique policy change that prolonged entitlement to regular unemployment benefits from 30 weeks to a maximum of 209 weeks for elderly individuals in certain regions of Austria. In the evaluation, we explicitly account for the fact that the program was an endogenous policy response to a crisis affecting individuals with severe labor market problems. The main results are: (i) REBP reduced the transition rate to jobs by 17%; (ii) accounting for endogenous policy adoption is important and quantitatively significant.

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Bibliographic Info

Paper provided by Institute for Empirical Research in Economics - University of Zurich in its series IEW - Working Papers with number 112.

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Handle: RePEc:zur:iewwpx:112

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Keywords: quasi-experiments; policy endogeneity; benefit entitlement; maximum benefit duration; unemployment duration; unemployment insurance;

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  1. Lalive, Rafael & van Ours, Jan C. & Zweimüller, Josef, 2000. "The Impact of Active Labor Market Programs and Benefit Entitlement Rules on the Duration of Unemployment," IZA Discussion Papers 149, Institute for the Study of Labor (IZA).
  2. Besley, Timothy & Case, Anne, 2000. "Unnatural Experiments? Estimating the Incidence of Endogenous Policies," Economic Journal, Royal Economic Society, vol. 110(467), pages F672-94, November.
  3. Bratberg, E. & Vaage, K., 2000. "Spell Durations with Long Unemployment Insurance Periods," Norway; Department of Economics, University of Bergen 208, Department of Economics, University of Bergen.
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  6. Nickell, S. & Layard, R., 1997. "Labour Market Institutions and Economic Performance," Papers 23, Centre for Economic Performance & Institute of Economics.
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  8. Bover, O. & Arellano, M. & Bentolila, S., 1997. "Unemployment Duration, Benefit Duration, and the Business Cycle," Papers 9717, Centro de Estudios Monetarios Y Financieros-.
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  17. Meyer, Bruce D, 1990. "Unemployment Insurance and Unemployment Spells," Econometrica, Econometric Society, vol. 58(4), pages 757-82, July.
  18. Rafael Lalive & Josef Zweimüller, 2002. "Benefit Entitlement and the Labor Market: Evidence from a Large-Scale Policy Change," CESifo Working Paper Series 694, CESifo Group Munich.
  19. Robert Moffitt, 2002. "The Temporary Assistance for Needy Families Program," NBER Working Papers 8749, National Bureau of Economic Research, Inc.
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  22. David Card, 1989. "The Impact of the Mariel Boatlift on the Miami Labor Market," Working Papers 633, Princeton University, Department of Economics, Industrial Relations Section..
  23. Winter-Ebmer, Rudolf, 1996. "Benefit Duration and Unemployment Entry: Quasi-experimental Evidence for Austria," CEPR Discussion Papers 1521, C.E.P.R. Discussion Papers.
  24. van den Berg, Gerard J, 1990. "Nonstationarity in Job Search Theory," Review of Economic Studies, Wiley Blackwell, vol. 57(2), pages 255-77, April.
  25. Carling, Kenneth & Edin, Per-Anders & Harkman, Anders & Holmlund, Bertil, 1996. "Unemployment duration, unemployment benefits, and labor market programs in Sweden," Journal of Public Economics, Elsevier, vol. 59(3), pages 313-334, March.
  26. 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.
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