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The Effect of Sanctions on the Job Finding Rate: Evidence from Denmark

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  • Svarer, Michael

    ()
    (Aarhus University)

Abstract

This paper investigates the effect of sanctions of unemployment insurance benefits on the exit rate from unemployment for a sample of Danish unemployed. According to the findings are that even moderate sanctions have rather large effects. For both males and females the exit rate increases by more than 50% following imposition of a sanction. The paper exploits a rather large sample to elaborate on the basic findings. It is shown that harder sanctions have a larger effect, that the effect of sanctions wear out after around 3 months and that particular groups of unemployed are more responsive to sanctions than others. Finally, the analysis suggests that men react ex ante to the risk of being sanctioned in the sense that men who face higher sanction risk leave unemployment faster.

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Bibliographic Info

Paper provided by Institute for the Study of Labor (IZA) in its series IZA Discussion Papers with number 3015.

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Length: 39 pages
Date of creation: Aug 2007
Date of revision:
Publication status: published as 'The Effect of Sanctions on Exit from Unemployment: Evidence from Denmark' in: Economica, 2011, 78 (312), 751 - 778
Handle: RePEc:iza:izadps:dp3015

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Keywords: unemployment hazard; sanctions;

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References

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  1. Jan Boone & Jan C. van Ours, 2006. "Modeling Financial Incentives to Get the Unemployed Back to Work," Journal of Institutional and Theoretical Economics (JITE), Mohr Siebeck, Tübingen, vol. 162(2), pages 227-252, June.
  2. Cockx, Bart & Dejemeppe, Muriel, 2007. "Is the Notification of Monitoring a Threat to the Unemployed? A Regression Discontinuity Approach," IZA Discussion Papers 2854, Institute for the Study of Labor (IZA).
  3. Torben Andersen & Michael Svarer, 2007. "Flexicurity – Labour Market Performance in Denmark," CESifo Working Paper Series 2108, CESifo Group Munich.
  4. Abbring, Jaap H & van den Berg, Gerard J, 2003. "A simple procedure for the evaluation of treatment effects on duration variables," Working Paper Series, IFAU - Institute for Evaluation of Labour Market and Education Policy 2003:19, IFAU - Institute for Evaluation of Labour Market and Education Policy.
  5. Boone, Jan & van Ours, Jan C, 2000. "Modelling Financial Incentives To Get Unemployed Back To Work," CEPR Discussion Papers 2361, C.E.P.R. Discussion Papers.
  6. Boone, Jan & Fredriksson, Peter & Holmlund, Bertil & van Ours, Jan, 2002. "Optimal unemployment insurance with monitoring and sanctions," Working Paper Series, IFAU - Institute for Evaluation of Labour Market and Education Policy 2002:21, IFAU - Institute for Evaluation of Labour Market and Education Policy.
  7. Michael Rosholm & Michael Svarer, 2004. "Estimating the Threat Effect of Active Labour Market Programmes," CAM Working Papers 2004-14, University of Copenhagen. Department of Economics. Centre for Applied Microeconometrics.
  8. van den Berg, Gerard J. & van der Klaauw, Bas, 2001. "Counseling and Monitoring of Unemployed Workers: Theory and Evidence from a Controlled Social Experiment," IZA Discussion Papers 374, Institute for the Study of Labor (IZA).
  9. Fredriksson, Peter & Holmlund, Bertil, 2003. "Optimal Unemployment Insurance Design:Time Limits, Monitoring, or Workfare?," Working Paper Series, Uppsala University, Department of Economics 2003:17, Uppsala University, Department of Economics.
  10. Boone, Jan & Sadrieh, Abdolkarim & van Ours, Jan C., 2009. "Experiments on unemployment benefit sanctions and job search behavior," European Economic Review, Elsevier, vol. 53(8), pages 937-951, November.
  11. Lalive, R. & Ours, J.C. van & Zweimüller, J., 2002. "The Effect of Benefit Sanctions on the Duration of Unemployment," Discussion Paper, Tilburg University, Center for Economic Research 2002-19, Tilburg University, Center for Economic Research.
  12. Røed, Knut & Westlie, Lars, 2007. "Unemployment Insurance in Welfare States: Soft Constraints and Mild Sanctions," Memorandum 13/2007, Oslo University, Department of Economics.
  13. 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, VU University Amsterdam, Faculty of Economics, Business Administration and Econometrics 0033, VU University Amsterdam, Faculty of Economics, Business Administration and Econometrics.
  14. Jaap H. Abbring & Gerard J. van den Berg, 2003. "The Nonparametric Identification of Treatment Effects in Duration Models," Econometrica, Econometric Society, Econometric Society, vol. 71(5), pages 1491-1517, 09.
  15. Dan A. Black & Jeffrey A. Smith & Mark C. Berger & Brett J. Noel, 2003. "Is the Threat of Reemployment Services More Effective Than the Services Themselves? Evidence from Random Assignment in the UI System," American Economic Review, American Economic Association, vol. 93(4), pages 1313-1327, September.
  16. Jaap H. Abbring & Gerard J. Berg & Jan C. Ours, 2005. "The Effect of Unemployment Insurance Sanctions on the Transition Rate from Unemployment to Employment," Economic Journal, Royal Economic Society, Royal Economic Society, vol. 115(505), pages 602-630, 07.
  17. Cees Gorter & Guyonne R. J. Kalb, 1996. "Estimating the Effect of Counseling and Monitoring the Unemployed Using a Job Search Model," Journal of Human Resources, University of Wisconsin Press, vol. 31(3), pages 590-610.
  18. Gerard J. van den Berg & Bas van der Klaauw, 2005. "Job Search Monitoring and Sanctions," CESifo DICE Report, Ifo Institute for Economic Research at the University of Munich, Ifo Institute for Economic Research at the University of Munich, vol. 3(2), pages 26-29, 07.
  19. 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.
  20. David Gray, 2003. "National Versus Regional Financing and Management of Unemployment and Related Benefits: The Case of Canada," OECD Social, Employment and Migration Working Papers 14, OECD Publishing.
  21. Van den Berg, Gerard J., 2001. "Duration models: specification, identification and multiple durations," Handbook of Econometrics, Elsevier, in: J.J. Heckman & E.E. Leamer (ed.), Handbook of Econometrics, edition 1, volume 5, chapter 55, pages 3381-3460 Elsevier.
  22. Lars Pico Geerdsen, 2006. "Is there a Threat Effect of Labour Market Programmes? A Study of ALMP in the Danish UI System," Economic Journal, Royal Economic Society, Royal Economic Society, vol. 116(513), pages 738-750, 07.
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