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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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  1. van den Berg, Gerard J & Vikström, Johan, 2009. "Monitoring Job Offer Decisions, Punishments, Exit to Work, and Job Quality," CEPR Discussion Papers 7460, C.E.P.R. Discussion Papers.
  2. Paul T. Decker & Christopher J. O'Leary, 1994. "Evaluating Pooled Evidence from the Reemployment Bonus Experiments," Upjohn Working Papers and Journal Articles 94-28, W.E. Upjohn Institute for Employment Research.
  3. Lalive, Rafael & van Ours, Jan C & Zweimüller, Josef, 2002. "The Effect of Benefit Sanctions on the Duration of Unemployment," CEPR Discussion Papers 3311, C.E.P.R. Discussion Papers.
  4. Gerard J. van den Berg & Bas van der Klaauw & Jan C. van Ours, 1998. "Punitive Sanctions and the Transition Rate from Welfare to Work," Tinbergen Institute Discussion Papers 98-076/3, Tinbergen Institute.
  5. 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).
  6. 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, vol. 115(505), pages 602-630, 07.
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  13. 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.
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  15. Hanming Fang & Dan Silverman, 2009. "Time-Inconsistency And Welfare Program Participation: Evidence From The Nlsy," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 50(4), pages 1043-1077, November.
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  18. 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.
  19. McVicar, Duncan, 2008. "Job search monitoring intensity, unemployment exit and job entry: Quasi-experimental evidence from the UK," Labour Economics, Elsevier, vol. 15(6), pages 1451-1468, December.
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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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