Job-search requirements for unemployed at the end of working life: Effects on unemployment dynamics and self-employment probabilities

This paper investigates the extent to which job search requirements in unemployment insurance (U.I.) 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 U.I. for persons aged 57.5 and older. 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 toU.I., but not relative to paid employment.