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Carrot and Stick: How Reemployment Bonuses and Benefit Sanctions Affect Job Finding Rates

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  • van der Klaauw, Bas
  • van Ours, Jan C.

Abstract

To increase their transition from welfare to work, benefit recipients in the municipality of Rotterdam were exposed to various financial incentives, including both carrots to sticks. Once their benefit spell exceeded one year, welfare recipients were entitled to a reemployment bonus if they found a job that lasted at least six months. However, they could also be punished for noncompliance with eligibility requirements and face a sanction, i.e. a temporary reducing of their benefits. In this paper we investigate how benefit sanctions and reemployment bonuses affect job finding rates of welfare recipients. We find that benefit sanctions were effective in bringing unemployed from welfare to work more quickly while reemployment bonuses were not.

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Bibliographic Info

Paper provided by C.E.P.R. Discussion Papers in its series CEPR Discussion Papers with number 7924.

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Date of creation: Jul 2010
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Handle: RePEc:cpr:ceprdp:7924

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Related research

Keywords: difference-in-difference; dynamic selection; financial incentives; timing-of-events; welfare to work;

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References

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  1. Abbring, Jaap H. & Berg, Gerard J. van den & Ours, Jan C. van, 1996. "The effect of unemployment insurance sanctions on the transition rate from unemployment to employment," Serie Research Memoranda 0038, VU University Amsterdam, Faculty of Economics, Business Administration and Econometrics.
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  6. Bernhard Boockmann & Stephan Thomsen & Thomas Walter, 2009. "Intensifying the Use of Benefit Sanctions – An Effective Tool to Shorten Welfare Receipt and Speed up Transitions to Employment?," IAW Discussion Papers 56, Institut für Angewandte Wirtschaftsforschung (IAW).
  7. Berg, Gerard J. van den & Klaauw, Bas van der & Ours, Jan C. van, 1998. "Punitive sanctions and the transition rate from welfare to work," Serie Research Memoranda 0033, VU University Amsterdam, Faculty of Economics, Business Administration and Econometrics.
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  10. Michael Svarer, 2007. "The Effect of Sanctions on the Job Finding Rate: Evidence from Denmark," Economics Working Papers 2007-10, School of Economics and Management, University of Aarhus.
  11. Rafael Lalive & Jan C. van Ours & Josef Zweimüller, 2005. "The Effect Of Benefit Sanctions On The Duration Of Unemployment," Journal of the European Economic Association, MIT Press, vol. 3(6), pages 1386-1417, December.
  12. Bijwaard, Govert E. & Ridder, Geert, 2005. "Correcting for selective compliance in a re-employment bonus experiment," Journal of Econometrics, Elsevier, vol. 125(1-2), pages 77-111.
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  15. Arni, P. & Lalive, R. & Ours, J.C. van, 2009. "How Effective are Unemployment Benefit Sanctions? Looking Beyond Unemployment Exit," Discussion Paper 2009-80, Tilburg University, Center for Economic Research.
  16. Jochen Kluve & Christoph M. Schmidt, 2002. "Can training and employment subsidies combat European unemployment?," Economic Policy, CEPR & CES & MSH, vol. 17(35), pages 409-448, October.
  17. Jensen, Peter & Rosholm, Michael & Svarer, Michael, 2003. "The response of youth unemployment to benefits, incentives, and sanctions," European Journal of Political Economy, Elsevier, vol. 19(2), pages 301-316, June.
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Cited by:
  1. Alessio J. G. Brown & Johannes Koettl, 2012. "Active Labor Market Programs - Employment Gain or Fiscal Drain?," Kiel Working Papers 1785, Kiel Institute for the World Economy.

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