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

  • Lalive, Rafael

    ()

    (University of Lausanne)

  • Zweimüller, Josef

    ()

    (University of Zurich)

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

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Length: 48 pages
Date of creation: Feb 2002
Date of revision:
Publication status: published in: Jonas Agell, Michael Keen and Alfons Weichenrieder (eds.), Labor Market Institutions and Public Regulation, 2004, 63-100
Handle: RePEc:iza:izadps:dp444
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  1. Ham, John C & Rea, Samuel A, Jr, 1987. "Unemployment Insurance and Male Unemployment Duration in Canada," Journal of Labor Economics, University of Chicago Press, vol. 5(3), pages 325-53, July.
  2. Arellano, Manuel & Bentolila, Samuel & Bover, Olympia, 1998. "Unemployment Duration, Benefit Duration and the Business Cycle," CEPR Discussion Papers 1840, C.E.P.R. Discussion Papers.
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  5. Winter-Ebmer, Rudolf, 1996. "Potential Unemployment Benefit Duration and Spell Length: Lessons from a Quasi-experiment in Austria," CEPR Discussion Papers 1534, C.E.P.R. Discussion Papers.
  6. Lawrence Katz & Bruce Meyer, 1988. "The Impact of the Potential Duration of Unemployment Benefits on the Duration of Unemployment," Working Papers 621, Princeton University, Department of Economics, Industrial Relations Section..
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  8. Baily, Martin Neil, 1977. "On the Theory of Layoffs and Unemployment," Econometrica, Econometric Society, vol. 45(5), pages 1043-63, July.
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  10. 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.
  11. Acemoglu, D. & Shimer, R., 1997. "Efficient Unemployment Insurance," Working papers 97-9, Massachusetts Institute of Technology (MIT), Department of Economics.
  12. Dale T. Mortensen, 1977. "Unemployment insurance and job search decisions," Industrial and Labor Relations Review, ILR Review, Cornell University, ILR School, vol. 30(4), pages 505-517, July.
  13. Jurajda, Štepán, 2001. "Estimating the Effect of Unemployment Insurance Compensation on the Labor Market Histories of Displaced Workers," IZA Discussion Papers 294, Institute for the Study of Labor (IZA).
  14. Acemoglu, Daron, 2001. "Good Jobs versus Bad Jobs," Journal of Labor Economics, University of Chicago Press, vol. 19(1), pages 1-21, January.
  15. Patricia M. Anderson & Bruce D. Meyer, 1994. "Unemployment Insurance Benefits and Takeup Rates," NBER Working Papers 4787, National Bureau of Economic Research, Inc.
  16. Card, David & Levine, Phillip B., 1994. "Unemployment insurance taxes and the cyclical and seasonal properties of unemployment," Journal of Public Economics, Elsevier, vol. 53(1), pages 1-29, January.
  17. Murphy, Kevin M & Topel, Robert H, 1997. "Unemployment and Nonemployment," American Economic Review, American Economic Association, vol. 87(2), pages 295-300, May.
  18. Nickell, Stephen J, 1982. "The Determinants of Equilibrium Unemployment in Britain," Economic Journal, Royal Economic Society, vol. 92(367), pages 555-75, September.
  19. 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.
  20. 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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  23. Moffitt, Robert & Nicholson, Walter, 1982. "The Effect of Unemployment Insurance on Unemployment: The Case of Federal Supplemental Benefits," The Review of Economics and Statistics, MIT Press, vol. 64(1), pages 1-11, February.
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  25. John Haltiwanger, 1982. "The Distinguishing Characteristics of Temporary and Permanent Layoffs," UCLA Economics Working Papers 273, UCLA Department of Economics.
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  28. Jaap H. Abbring & Gerard J. Berg & Jan C. Ours, 2005. "The Effect of Unemployment Insurance Sanctions on the Transition Rate from Unemployment to Employment," Economic Journal, Royal Economic Society, vol. 115(505), pages 602-630, 07.
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  31. repec:oup:restud:v:57:y:1990:i:2:p:255-77 is not listed on IDEAS
  32. repec:oup:restud:v:61:y:1994:i:3:p:397-415 is not listed on IDEAS
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