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Unearned Income and Labor Supply: Evidence from Survivor Pensions in Austria

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  • René Böheim
  • Michael Topf

Abstract

We study the effect of lower unearned income on labor supply. To identify the causal effect of an unexpected reduction in unearned income, we exploit a policy reform that lowered survivor pensions in Austria. Men widowed after the survivor pension reform received an approximately 34% lower survivor pension than men widowed before the reform. We follow the employment history of both groups for 150 months and estimate the reform’s effect on labor supply using a regression discontinuity design. The effect of the lower pension is evident immediately after the death of their spouse, is persistent over time, becomes more pronounced over time, and is robust across model specifications. Our baseline result suggests a 3.5 to 5.4 percentage point higher employment rate for survivors in the low pension regime in the long run. The estimated effect corresponds to a labor supply elasticity at the extensive margin with respect to the changes in total income of about –0.9 to –1.3.

Suggested Citation

  • René Böheim & Michael Topf, 2021. "Unearned Income and Labor Supply: Evidence from Survivor Pensions in Austria," CESifo Working Paper Series 8851, CESifo.
  • Handle: RePEc:ces:ceswps:_8851
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    References listed on IDEAS

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    Cited by:

    1. Julie Tréguier & Simon Rabaté, 2021. "Survivors Benefits and Conjugal Behavior. Evidence from the Netherlands," EconomiX Working Papers 2021-16, University of Paris Nanterre, EconomiX.
    2. Kaan Celebi & Paul J.J. Welfens, 2021. "The Stock Market, Labor-Income Risk and Unemployment in the US: Empirical Findings and Policy Implications," EIIW Discussion paper disbei291, Universitätsbibliothek Wuppertal, University Library.
    3. Julie Tréguier & Simon Rabaté, 2021. "Survivors Benefits and Conjugal Behavior. Evidence from the Netherlands," Working Papers halshs-03156317, HAL.
    4. Julie Tréguier & Simon Rabaté, 2021. "Survivors Benefits and Conjugal Behavior. Evidence from the Netherlands," Institut des Politiques Publiques halshs-03156317, HAL.

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    More about this item

    Keywords

    labor supply; unearned income; regression discontinuity design;
    All these keywords.

    JEL classification:

    • I38 - Health, Education, and Welfare - - Welfare, Well-Being, and Poverty - - - Government Programs; Provision and Effects of Welfare Programs
    • J22 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Time Allocation and Labor Supply
    • J48 - Labor and Demographic Economics - - Particular Labor Markets - - - Particular Labor Markets; Public Policy

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