Extended Unemployment Benefits and Early Retirement: Program Complementarity and Program Substitution
American Economic Journal: Economic Policy
vol. 8,
no. 1, February 2016
(pp. 253-88)
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. (JEL J14, J22, J26, J65)Citation
Inderbitzin, Lukas, Stefan Staubli, and Josef Zweimüller. 2016. "Extended Unemployment Benefits and Early Retirement: Program Complementarity and Program Substitution." American Economic Journal: Economic Policy, 8 (1): 253-88. DOI: 10.1257/pol.20130315Additional Materials
JEL Classification
- J14 Economics of the Elderly; Economics of the Handicapped; Non-labor Market Discrimination
- J22 Time Allocation and Labor Supply
- J26 Retirement; Retirement Policies
- J65 Unemployment Insurance; Severance Pay; Plant Closings
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