Benefit duration and unemployment entry: A quasi-experiment in Austria

Apart from being an important aspect of job-search behavior of individuals, potential benefit duration can also have effects on unemployment entry rates. In this paper, the causal connection between the two is investigated for the case of Austria, using a quasi-experimental situation that arose following the enactment of a law that extended benefit duration for older workers in specific regions of the country. Unemployment entry is found to have risen between 4 and 11 percentage points due to the new law. Several robustness checks are presented to see if a causal interpretation of this result is possible. Preliminary analysis shows that this increase in unemployment entry can be best understood not as voluntary quits but layoffs by firms who want to get rid of high-tenured and expensive older workers.