DP3363 Benefit Entitlement and Unemployment Duration: The Role of Policy Endogeneity

Author(s): Rafael Lalive, Josef Zweim├╝ller
Publication Date: May 2002
Keyword(s): benefit entitlement, maximum benefit duration, policy endogeneity, quasi-experiments, unemployment duration, unemployment insurance
JEL(s): C41, J64, J65
Programme Areas: Labour Economics
Link to this Page: www.cepr.org/active/publications/discussion_papers/dp.php?dpno=3363

The potential duration of benefits is generally viewed as an important determinant of unemployment duration. This Paper evaluates a unique policy change that prolonged entitlement to regular unemployment benefits from 30 weeks to a maximum of 209 weeks for elderly individuals in certain regions of Austria. In the evaluation, we explicitly account for the fact that the programme was an endogenous policy response to a crisis affecting individuals with severe labour market problems. The main results are: (i) REBP reduced the transition rate to jobs by 17 %; (ii) accounting for endogenous policy adoption is important and quantitatively significant.