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When Institutions Interact: How the Effects of Unemployment Insurance are Shaped by Retirement Policies

Author

Listed:
  • Matthew Gudgeon

  • Pablo Guzman-Pinto

  • Johannes Schmieder

  • Simon Trenkle

  • Han Ye

Abstract

We show that the non-employment effects of unemployment insurance (UI) for older workers depend critically on retirement policy. Using German data, we document large bunching in UI inflows at the age that allows workers to claim their pension following UI expiration. Inflows respond strongly to several UI and pension reforms. We probe the implications of these behavioral responses using a dynamic model and find that Germany’s UI and retirement policy changes had substantial effects on the unemployment rate of older workers. Furthermore, we calculate large fiscal externalities from extending UI for older workers, especially under generous retirement policies.

Suggested Citation

  • Matthew Gudgeon & Pablo Guzman-Pinto & Johannes Schmieder & Simon Trenkle & Han Ye, 2023. "When Institutions Interact: How the Effects of Unemployment Insurance are Shaped by Retirement Policies," CRC TR 224 Discussion Paper Series crctr224_2023_481v2, University of Bonn and University of Mannheim, Germany, revised Oct 2025.
    • Handle: RePEc:bon:boncrc:crctr224_2023_481v2
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    Keywords

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    JEL classification:

    • J26 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Retirement; Retirement Policies
    • J64 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Unemployment: Models, Duration, Incidence, and Job Search
    • J65 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Unemployment Insurance; Severance Pay; Plant Closings

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