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Does Reducing Unemployment Benefits during a Recession Reduce Youth Unemployment? Evidence from a 50% cut in Unemployment Assistance

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  • Aedin Doris

    (Department of Economics, Finance and Accounting, Maynooth University.)

  • Donal O'Neill

    (Department of Economics, Finance and Accounting, Maynooth University.)

  • Olive Sweetman

    (Department of Economics, Finance and Accounting, Maynooth University.)

Abstract

We use administrative data to examine the effect of a 50% benefit cut for young unemployed workers in Ireland during the Great Recession. Because the cut applied only to new benefit claims, claimants whose unemployment start dates differed by a matter of days received very different benefits; we exploit this fact in our Regression Discontinuity and Difference-in-Difference analyses. While we find no impact on unemployment duration for those aged 20-21, the benefit cut significantly reduced duration for 18 year olds, with an estimated elasticity close to one. We consider possible explanations for our findings and also examine long-run effects.

Suggested Citation

  • Aedin Doris & Donal O'Neill & Olive Sweetman, 2017. "Does Reducing Unemployment Benefits during a Recession Reduce Youth Unemployment? Evidence from a 50% cut in Unemployment Assistance," Economics Department Working Paper Series n279-17.pdf, Department of Economics, National University of Ireland - Maynooth.
  • Handle: RePEc:may:mayecw:n279-17.pdf
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    2. Redmond, Paul & McGuinness, Seamus & Maître, Bertrand, 2018. "An examination of the labour market transitions of minimum wage workers," Research Series, Economic and Social Research Institute (ESRI), number RS75.

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    More about this item

    Keywords

    unemployment assistance; labour supply; regression discontinuity;
    All these keywords.

    JEL classification:

    • J64 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Unemployment: Models, Duration, Incidence, and Job Search

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