Working Paper: NBER ID: w30301
Authors: Gerard Domnecharum; Silvia Vannutelli
Abstract: We exploit an unanticipated labor market reform to estimate the effects of pro-cyclical 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 (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 wages upon re-employment. 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.
Keywords: No keywords provided
JEL Codes: J31; J64; J65
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| 2012 labor market reform in Spain (J48) | reduction in nonemployment duration (J65) |
| 2012 labor market reform in Spain (J48) | higher likelihood of labor force exit (J26) |
| 2012 labor market reform in Spain (J48) | increased take-up of other less generous UA programs (H53) |
| 2012 labor market reform in Spain (J48) | drop in reemployment wages (J68) |
| reduction in nonemployment duration (J65) | increase in job finding rates (J68) |
| reduction in nonemployment duration (J65) | adverse effects on wage levels (F66) |