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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

    ()
    (VU University Amsterdam)

  • van Ours, Jan C.

    ()
    (Tilburg University)

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 Institute for the Study of Labor (IZA) in its series IZA Discussion Papers with number 5055.

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Length: 31 pages
Date of creation: Jul 2010
Date of revision:
Publication status: published in: Journal of Applied Econometrics, 2013, 28 (2), 275–296
Handle: RePEc:iza:izadps:dp5055

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

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References

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  20. 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, VU University Amsterdam, Faculty of Economics, Business Administration and Econometrics 0038, VU University Amsterdam, Faculty of Economics, Business Administration and Econometrics.
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Cited by:
  1. Brown, Alessio J. G. & Koettl, Johannes, 2012. "Active Labor Market Programs: Employment Gain or Fiscal Drain?," IZA Discussion Papers 6880, Institute for the Study of Labor (IZA).

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