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

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  • Rafael Lalive
  • Josef Zweimüller

Abstract

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 Empirical Research in Economics - University of Zurich in its series IEW - Working Papers with number 105.

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Handle: RePEc:zur:iewwpx:105
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Keywords: quasi-experiments; maximum benefit duration; unemployment inflow; duration of unemployment; early retirement; earnings; inequality;

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Find related papers by JEL classification:
  • C4 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods: Special Topics
  • 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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Cited by:

  1. Lalive, Rafael & Zweimüller, Josef, 2002. "Benefit Entitlement and Unemployment Duration: The Role of Policy Endogeneity," CEPR Discussion Papers 3363, C.E.P.R. Discussion Papers.
  2. Rafael Lalive & Jan C. van Ours & Josef Zweimüller, 2004. "How Changes in Financial Incentives Affect the Duration of Unemployment," CESifo Working Paper Series 1337, CESifo Group Munich.
  3. Lalive, Rafael, 2008. "How do extended benefits affect unemployment duration A regression discontinuity approach," Journal of Econometrics, Elsevier, vol. 142(2), pages 785-806, February.
  4. Tatsiramos, K. & van Ours, J.C., 2012. "Labor Market Effects of Unemployment Insurance Design," Discussion Paper 2012-082, Tilburg University, Center for Economic Research.
  5. repec:ner:tilbur:urn:nbn:nl:ui:12-92281 is not listed on IDEAS
  6. Arslan, Yavuz & Taskin, Temel, 2011. "Explaining the gender gaps in unemployment across OECD countries," MPRA Paper 34873, University Library of Munich, Germany.
  7. Björn Christensen, 2003. "Die Reform der Arbeitslosenversicherung im Zuge der Agenda 2010 und ihr Einfluss auf die Arbeitslosigkeitsdauer � Simulationsergebnisse auf Basis der nicht-stationären Suchtheorie," Kiel Working Papers 1171, Kiel Institute for the World Economy.
  8. repec:dgr:kubcen:2012082 is not listed on IDEAS
  9. repec:dgr:kubcen:200486 is not listed on IDEAS

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