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Unearned income and labor supply: Evidence from survivor pensions in Austria

René Böheim () and Michael Topf

No 2020-27, Economics working papers from Department of Economics, Johannes Kepler University Linz, Austria

Abstract: We study the effect of lower unearned income on labor supply. To identify the causal effect of an unexpected reduction in unearned income, we exploit a policy reform that lowered survivor pensions in Austria. Men widowed after the survivor pension reform received an approximately 34% lower survivor pension than men widowed before the reform. We follow the employment history of both groups for 150 months and estimate the reform’s effect on labor supply using a regression discontinuity design. The effect of the lower pension is evident immediately after the death of their spouse, is persistent over time, becomes more pronounced over time, and is robust across model specifications. Our baseline result suggests a 3.5 to 5.4 percentage point higher employment rate for survivors in the low pension regime in the long run. The estimated effect corresponds to a labor supply elasticity at the extensive margin with respect to the changes in total income of about -0.9 to -1.3.

Keywords: labor supply; unearned income; regression discontinuity design. (search for similar items in EconPapers)
JEL-codes: I38 J22 J48 (search for similar items in EconPapers)
Date: 2020-12
New Economics Papers: this item is included in nep-age, nep-dem, nep-eur and nep-lma
Note: English
References: View references in EconPapers View complete reference list from CitEc
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http://www.econ.jku.at/papers/2020/wp2027.pdf (application/pdf)

Related works:
Working Paper: Unearned Income and Labor Supply: Evidence from Survivor Pensions in Austria (2021) Downloads
Working Paper: Unearned Income and Labor Supply: Evidence from Survivor Pensions in Austria (2020) Downloads
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Persistent link: https://EconPapers.repec.org/RePEc:jku:econwp:2020-27

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