Re-employment Rates of Older Unemployed Workers: Decomposing the Effect of Birth Cohorts and Policy Changes

In many European countries, re-employment probabilities of older unemployed workers are relatively low. While there is evidence that financial incentives and search obligations are effective to increase the job prospects of older workers, recent research also stresses the importance of birth cohort effects. These cohort effects may in turn stem from higher educational attainment levels and better health conditions of future generations of older workers. This paper empirically assesses the relative importance of both explanations, using a registered data set of unemployment insurance spells between 1999 and 2008 for the Netherlands. Using a Linear Probability Model, we decompose the effects of birth cohorts, age, calendar time and two policy measures that were targeted at older unemployed workers—i.e. increased job search obligations in 2004 and shorter potential benefit durations (PBD) in 2006. We find that policy effects predominantly explain the increased job return rates of unemployed of 55 years and older from 1999 to 2008. The introduction of search requirements has increased the one-year re-employment probability of eligible older men with about 5 % point, while the reduction in PBD has caused the one-year re-employment probability of eligible men to increase with 3 % point. Copyright Springer Science+Business Media New York 2013