published in: Jonas Agell, Michael Keen and Alfons Weichenrieder (eds.), Labor Market Institutions and Public Regulation, 2004, 63-100
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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