Bringing Them In or Pushing Them Out? The Labor Market Effects of Pro-Cyclical Unemployment Assistance Changes

Gerard Domènech-Arumí and Silvia Vannutelli
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Gerard Domènech-Arumí: Université Libre de Bruxelles
Silvia Vannutelli: Northwestern University and NBER

The Review of Economics and Statistics, 2025, vol. 107, issue 2, 324-337

Abstract: We exploit an unanticipated labor market reform to estimate the effects of procyclical changes in long-term unemployment assistance (UA). In July 2012, Spain raised the minimum age to receive unlimited-duration UA from 52 to 55. Using a difference-in-differences design, we document that shorter benefits caused (1) shorter unemployment duration, especially among younger workers; (2) higher labor force exit and other programs’ take-up, especially among older workers; and (c) lower wages upon reemployment. The reform induced moderate government savings. Our results highlight the importance of considering the interplay with labor market conditions when designing long-term benefit schedules that affect workers close to retirement.

Date: 2025
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