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Cost-Effectiveness of Targeted Reemployment Bonuses

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Abstract

Targeting reemployment bonus offers to unemployment insurance (UI) claimants identified as most likely to exhaust benefits is estimated to reduce benefit payments. While earlier research indicated that non-targeted reemployment bonus offers would not be good public policy, in this paper we show that targeting bonus offers with profiling models similar to those in state Worker Profiling and Reemployment Services (WPRS) systems can improve their cost effectiveness. Since estimated average benefit payments do not steadily decline as the eligibility screen is gradually tightened, we find that narrow targeting is not optimal. The best candidate to emerge for a targeted reemployment bonus is a low bonus amount with a long qualification period, targeted to the half of profiled claimants most likely to exhaust their UI benefit entitlement.

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Paper provided by W.E. Upjohn Institute for Employment Research in its series Upjohn Working Papers and Journal Articles with number cjo2005jhr.

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Handle: RePEc:upj:weupjo:cjo2005jhr

Note: Appears in Journal of Human Resources 40(1): 270-279
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Keywords: reemployment bonuses; unemployment insurance; displaced workers; dislocated workers; reemployment;

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References

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  1. Carl Davidson & Stephen A. Woodbury, 1990. "The Displacement Effect of Reemployment Bonus Programs," Upjohn Working Papers and Journal Articles, W.E. Upjohn Institute for Employment Research 90-02, W.E. Upjohn Institute for Employment Research.
  2. Paul Decker & Christopher O'Leary, 1995. "Evaluating Pooled Evidence from the Reemployment Bonus Experiments," Mathematica Policy Research Reports, Mathematica Policy Research 1978, Mathematica Policy Research.
  3. Stephen A. Woodbury, 2009. "Unemployment," Book chapters authored by Upjohn Institute researchers, W.E. Upjohn Institute for Employment Research, in: Kenneth G. Dau-Schmidt & Seth D. Harris & Orley Lobel (ed.), Labor and Employment Law and Economics, volume 2, pages 480-516 W.E. Upjohn Institute for Employment Research.
  4. Christopher J. O'Leary & Robert G. Spiegelman & Kenneth J. Kline, 1995. "Do bonus offers shorten unemployment insurance spells? results from the washington experiment," Journal of Policy Analysis and Management, John Wiley & Sons, Ltd., vol. 14(2), pages 245-269.
  5. Bruce D. Meyer, 1995. "Lessons from the U.S. Unemployment Insurance Experiments," Journal of Economic Literature, American Economic Association, vol. 33(1), pages 91-131, March.
  6. Stephen A. Woodbury & Robert G. Spiegelman, . "Bonuses to Workers and Employers to Reduce unemployment: Randomized Trials in Illinois," Upjohn Working Papers and Journal Articles, W.E. Upjohn Institute for Employment Research sawrgs1987, W.E. Upjohn Institute for Employment Research.
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Cited by:
  1. Stefanie Behncke & Markus Frölich & Michael Lechner, 2007. "Targeting Labour Market Programmes - Results from a Randomized Experiment," University of St. Gallen Department of Economics working paper series 2007, Department of Economics, University of St. Gallen 2007-37, Department of Economics, University of St. Gallen.
  2. Yosuke Oda, 2008. "Alteration in Skills and Career-Enhancing in a Frictional Labor Market," Discussion Papers in Economics and Business 08-09, Osaka University, Graduate School of Economics and Osaka School of International Public Policy (OSIPP).
  3. Brown, Alessio J G & Merkl, Christian & Snower, Dennis J., 2007. "Comparing the Effectiveness of Employment Subsidies," CEPR Discussion Papers, C.E.P.R. Discussion Papers 6334, C.E.P.R. Discussion Papers.
  4. Lisa M. Lynch, 2005. "Job loss: bridging the research and policy discussion," Economic Perspectives, Federal Reserve Bank of Chicago, Federal Reserve Bank of Chicago, issue Q II, pages 29-37.
  5. Knoef, Marike & van Ours, Jan C., 2014. "How to Stimulate Single Mothers on Welfare to Find a Job: Evidence from a Natural Experiment," IZA Discussion Papers 8188, Institute for the Study of Labor (IZA).
  6. Frank Oskamp & Dennis J. Snower, 2007. "Interactions between Employment and Training Policies," Kiel Working Papers 1389, Kiel Institute for the World Economy.
  7. Walter Nicholson & Karen Needels, 2006. "Unemployment Insurance: Strengthening the Relationship between Theory and Policy," Journal of Economic Perspectives, American Economic Association, vol. 20(3), pages 47-70, Summer.
  8. Marike Knoef & Jan C. van Ours, 2014. "How to Stimulate Single Mothers on Welfare to Find a Job; Evidence from a Natural Experiment," CESifo Working Paper Series 4804, CESifo Group Munich.
  9. Hyun Kim & Yong-seong Kim & Myoung-jae Lee, 2012. "Treatment effect analysis of early reemployment bonus program: panel MLE and mode-based semiparametric estimator for interval truncation," Portuguese Economic Journal, Springer, Springer, vol. 11(3), pages 189-209, December.
  10. Randall W. Eberts, . "After the Doors Close: Assisting Laid-Off Workers to Find Jobs," Upjohn Working Papers and Journal Articles, W.E. Upjohn Institute for Employment Research rwe2005, W.E. Upjohn Institute for Employment Research.
  11. Randall W. Eberts, 2005. "After the doors close: assisting laid-off workers to find jobs," Economic Perspectives, Federal Reserve Bank of Chicago, Federal Reserve Bank of Chicago, issue Q II, pages 75-85.

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