Job-Search Requirements for Unemployed at the End of Working Life: Effects on Unemployment Dynamics and Self-Employment Probabilities

Abstract

This paper investigates the extent to which job-search requirements in unemployment insurance (UI) increase the probability of self-employment as a retirement route. For causal identification we apply a difference-in-differences approach, using a Dutch 2004 policy reform that introduced job-search requirements in UI for persons aged 57.5+. Unemployment dynamics and self-employment probabilities are studied using a dynamic multinomial logit model with unobserved heterogeneity. The results suggest that job-search requirements stimulated people to exit unemployment and discouraged older workers to enter unemployment. The probability of self-employment as an exit route to retirement increased relative to UI, but not relative to paid-employment.