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

Author

Listed:
  • Matthew Gudgeon
  • Pablo Guzman
  • Johannes F. 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 & Johannes F. Schmieder & Simon Trenkle & Han Ye, 2023. "When Institutions Interact: How the Effects of Unemployment Insurance are Shaped by Retirement Policies," NBER Working Papers 31807, National Bureau of Economic Research, Inc.
    • Handle: RePEc:nbr:nberwo:31807
    Note: AG LS PE
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    Cited by:

    1. Jessen, Jonas & Jessen, Robin & Galecka-Burdziak, Ewa & Góra, Marek & Kluve, Jochen, 2023. "The Micro and Macro Effects of Changes in the Potential Benefit Duration," IZA Discussion Papers 15978, IZA Network @ LISER.
    2. Nassal, Lea, 2025. "Job Loss and Retirement," The Warwick Economics Research Paper Series (TWERPS) 1565, University of Warwick, Department of Economics.
    3. Sona Badalyan, 2025. "Peer Effects in Old-Age Employment Among Women," CERGE-EI Working Papers wp800, The Center for Economic Research and Graduate Education - Economics Institute, Prague.
    4. Bertermann, Alexander & Dauth, Wolfgang & Suedekum, Jens & Woessmann, Ludger, 2025. "Training or Retiring? How Labor Markets Adjust to Trade and Technology Shocks," IZA Discussion Papers 18247, IZA Network @ LISER.

    More about this item

    JEL classification:

    • E24 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Employment; Unemployment; Wages; Intergenerational Income Distribution; Aggregate Human Capital; Aggregate Labor Productivity
    • J2 - Labor and Demographic Economics - - Demand and Supply of Labor
    • J26 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Retirement; Retirement Policies
    • J6 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers
    • J63 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Turnover; Vacancies; Layoffs
    • 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
    • J68 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Public Policy

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