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Reduction in the Long-Term Unemployment of the Elderly: A Success Story from Finland

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  • Kyyrä, Tomi
  • Wilke, Ralf A.

Abstract

In Finland the elderly unemployed are allowed to collect unemployment benefits up to the age of 60, when they can retire via a particular unemployment pension. In 1997 the eligibility age of persons benefiting from this scheme was raised from 53 to 55. We consider changes in the risk of unemployment, unemployment durations, and the exit states before and after the reform. In the duration analysis a flexible treatment design is adopted by allowing for quantile treatment effects. We apply three different non- and semiparametric methods, which all produce robust and coherent results. Since the reform the group aged 53-54 has had a lower risk of unemployment, shorter unemployment durations, and higher exit rates to employment, and it is no longer distinguishable from the group aged 50-52. We estimate the amount of unemployment benefits saved due to the reform.

Suggested Citation

  • Kyyrä, Tomi & Wilke, Ralf A., 2004. "Reduction in the Long-Term Unemployment of the Elderly: A Success Story from Finland," ZEW Discussion Papers 04-63, ZEW - Zentrum für Europäische Wirtschaftsforschung / Center for European Economic Research.
  • Handle: RePEc:zbw:zewdip:2352
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    References listed on IDEAS

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    1. Heckman, James & Singer, Burton, 1984. "A Method for Minimizing the Impact of Distributional Assumptions in Econometric Models for Duration Data," Econometrica, Econometric Society, vol. 52(2), pages 271-320, March.
    2. Carling, Kenneth & Holmlund, Bertil & Vejsiu, Altin, 2001. "Do Benefit Cuts Boost Job Finding? Swedish Evidence from the 1990s," Economic Journal, Royal Economic Society, vol. 111(474), pages 766-790, October.
    3. Meyer, Bruce D, 1990. "Unemployment Insurance and Unemployment Spells," Econometrica, Econometric Society, vol. 58(4), pages 757-782, July.
    4. Yannis Bilias & Roger Koenker, 2001. "Quantile regression for duration data: A reappraisal of the Pennsylvania Reemployment Bonus Experiments," Empirical Economics, Springer, pages 199-220.
    5. Elke Lüdemann & Ralf Wilke & Xuan Zhang, 2006. "Censored quantile regressions and the length of unemployment periods in West Germany," Empirical Economics, Springer, pages 1003-1024.
    6. Arnott, Richard J & Hosios, Arthur J & Stiglitz, Joseph E, 1988. "Implicit Contracts, Labor Mobility, and Unemployment," American Economic Review, American Economic Association, vol. 78(5), pages 1046-1066, December.
    7. Elke Lüdemann & Ralf Wilke & Xuan Zhang, 2006. "Censored quantile regressions and the length of unemployment periods in West Germany," Empirical Economics, Springer, pages 1003-1024.
    8. Erkki Koskela & Roope Uusitalo, 2003. "The Un-Intended Convergence: How the Finnish Unemployment Reached the European Level," CESifo Working Paper Series 878, CESifo Group Munich.
    9. Hutchens, Robert, 1999. "Social Security Benefits and Employer Behavior: Evaluating Social Security Early Retirement Benefits as a Form of Unemployment Insurance," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 40(3), pages 659-678, August.
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    11. 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.
    12. Han, Aaron & Hausman, Jerry A, 1990. "Flexible Parametric Estimation of Duration and Competing Risk Models," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 5(1), pages 1-28, January-M.
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    More about this item

    Keywords

    Unemployment insurance reform; quantile treatment effect; non- and semiparametric methods; Finnish register data;

    JEL classification:

    • C14 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Semiparametric and Nonparametric Methods: General
    • J64 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Unemployment: Models, Duration, Incidence, and Job Search
    • C41 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods: Special Topics - - - Duration Analysis; Optimal Timing Strategies
    • J26 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Retirement; Retirement Policies

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