Bringing Them In or Pushing Them Out? The Labor Market Effects of Pro-Cyclical Unemployment Assistance Changes (WP-22-33)
Gerard Domènech-Arumí and Silvia Vannutelli
The researchers exploit an unanticipated labor market reform in 2012 Spain to estimate the effects of procyclical changes in long-term unemployment assistance (UA). The reform raised the minimum age to receive unlimited-duration UA from 52 to 55. Using a difference-in-differences design, they document that shorter benefits caused (i) shorter non-employment duration, especially among younger workers; (ii) higher labor force exit and other programs' take-up, especially among older workers; (iii) lower re-employment wages. The reform induced moderate government savings. The authors’ results highlight how considering the interplay with labor market conditions is crucial when designing long-term benefit schedules affecting workers close to retirement.