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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
  • Silvia Vannutelli

Abstract

We exploit an unanticipated labor market reform in 2012 Spain to estimate the effects of pro-cyclical changes in long-term unemployment assistance (UA). The reform raised the minimum age to receive unlimited-duration UA from 52 to 55. Using a dfference-in-differences design, we 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 reemployment wages. The reform induced moderate government savings. Our results highlight how considering the interplay with labor market conditions is crucial when designing long-term beneffit schedules affecting workers close to retirement.

Suggested Citation

  • Gerard Domènech-Arumí & Silvia Vannutelli, 2022. "Bringing Them In or Pushing Them Out? The Labor Market Effects of Pro-cyclical Unemployment Assistance Changes," Working Papers ECARES 2022-24, ULB -- Universite Libre de Bruxelles.
    • Handle: RePEc:eca:wpaper:2013/348471
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    Cited by:

    1. Stefano Della & Jörg Heining & Johannes F Schmieder & Simon Trenkle, 2022. "Evidence on Job Search Models from a Survey of Unemployed Workers in Germany [Reference-Dependent Preferences: Evidence from Marathon Runners]," The Quarterly Journal of Economics, Oxford University Press, vol. 137(2), pages 1181-1232.
    2. Goensch, Johannes & Gulyas, Andreas & Kospentaris, Ioannis, 2024. "Worker mobility and UI extensions," European Economic Review, Elsevier, vol. 162(C).
    3. José Ignacio Garcia-Pérez & Manuel Serrano-Alarcón & Judit Vall-Castelló, 2024. "Long-term unemployment subsidies and middle-aged disadvantaged workers’ health," Journal of Population Economics, Springer;European Society for Population Economics, vol. 37(1), pages 1-24, March.
    4. Hernandez Martinez, Victor & Liu, Kaixin, 2025. "The value of unemployment insurance: Liquidity vs. insurance value," Labour Economics, Elsevier, vol. 93(C).

    More about this item

    Keywords

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    JEL classification:

    • J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials
    • J64 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Unemployment: Models, Duration, Incidence, and Job Search
    • J65 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Unemployment Insurance; Severance Pay; Plant Closings

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