Benefit Duration and Unemployment Entry: Quasi-experimental Evidence for Austria

Rudolf Winter-Ebmer

No 1521, CEPR Discussion Papers from Centre for Economic Policy Research

Abstract: This paper studies the impact of a selective extension of unemployment benefit duration on the incidence of unemployment in Austria. As the new law applies only to elderly workers in certain regions of the country after June 1988, a quasi-experimental situation is created. Unemployment entry is found to rise by between four and eleven percentage points due to the new law. The findings are explained by a breach of an implicit contract; elderly workers receive wages above their marginal product in order to elicit higher effort. Dismissal of elderly workers is now easier because more generous unemployment insurance makes reputation loss for the firm less severe.

Keywords: Elderly Workers; Implicit Contracts; Unemployment Entry; Unemployment Insurance (search for similar items in EconPapers)
JEL-codes: J14 J41 J64 J65 (search for similar items in EconPapers)
Date: 1996-12
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Citations: View citations in EconPapers (16)

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