Working Paper: CEPR ID: DP10646
Authors: Lukas Inderbitzin; Stefan Staubli; Josef Zweimüller
Abstract: We explore how extended unemployment insurance (UI) benefits for older workers affect early retirement and welfare. We argue that extending UI benefits generates program complementarity (more labor market exits and disability benefit take-up in the future) and program substitution (less disability benefit take-up in the present). Exploiting a policy change in Austria, which extended UI benefits to 4 years, we find program complementarity effects for workers aged 50+ and program substitution effects for workers aged 55+. We apply the Baily-Chetty formula for optimal UI to account for complementarity and substitution, showing that UI benefits for older workers were too generous.
Keywords: disability; early retirement; optimal benefits; policy reform; unemployment
JEL Codes: J14; J26; J65
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Extended unemployment insurance (UI) benefits (J65) | early retirement (J26) |
| Extended unemployment insurance (UI) benefits (J65) | exits to disability insurance (DI) for ages 50-54 (J26) |
| Extended unemployment insurance (UI) benefits (J65) | claiming old-age pensions for ages 55-57 (J26) |
| Abolishment of extended unemployment insurance (UI) benefits (J65) | early retirement (J26) |
| Extended unemployment insurance (UI) benefits (J65) | decreased DI takeup for older workers opting for early retirement (J26) |