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

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Listed author(s):
  • Rafael Lalive
  • Josef Zweim�ller

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. Rafael Lalive & Jan Van Ours & Josef Zweimuller, 2006. "How Changes in Financial Incentives Affect the Duration of Unemployment," Review of Economic Studies, Oxford University Press, vol. 73(4), pages 1009-1038.
  2. Lalive, Rafael & Zweimuller, Josef, 2004. "Benefit entitlement and unemployment duration: The role of policy endogeneity," Journal of Public Economics, Elsevier, vol. 88(12), pages 2587-2616, December.
  3. Konstantinos Tatsiramos & Jan C. Ours, 2014. "Labor Market Effects Of Unemployment Insurance Design," Journal of Economic Surveys, Wiley Blackwell, vol. 28(2), pages 284-311, 04.
  4. Christensen, Björn, 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 (IfW).
  5. 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.
  6. 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.
  7. Arslan, Yavuz & Taskin, Temel, 2011. "Explaining the gender gaps in unemployment across OECD countries," MPRA Paper 34873, University Library of Munich, Germany.

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