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

Author

Listed:
  • Gerard Domènech-Arumí

    (Université Libre de Bruxelles)

  • Silvia Vannutelli

    (Northwestern University and NBER)

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.

Suggested Citation

  • Gerard Domènech-Arumí & Silvia Vannutelli, 2025. "Bringing Them In or Pushing Them Out? The Labor Market Effects of Pro-Cyclical Unemployment Assistance Changes," The Review of Economics and Statistics, MIT Press, vol. 107(2), pages 324-337, March.
    • Handle: RePEc:tpr:restat:v:107:y:2025:i:2:p:324-337
    DOI: 10.1162/rest_a_01310
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