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Notes on behavioral economics and labor market policy

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  • Linda Babcock

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  • William Congdon

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  • Lawrence Katz

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  • Sendhil Mullainathan

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Abstract

Labor market policies succeed or fail at least in part depending on how well they reflect or account for behavioral responses. Insights from behavioral economics, which allow for realistic deviations from standard economic assumptions about behavior, have consequences for the design and functioning of labor market policies. We review key implications of behavioral economics related to procrastination, difficulties in dealing with complexity, and potentially biased labor market expectations for the design of selected labor market policies including unemployment compensation, employment services and job search assistance, and job training. Copyright Babcock et al.; licensee Springer. 2012

Suggested Citation

  • Linda Babcock & William Congdon & Lawrence Katz & Sendhil Mullainathan, 2012. "Notes on behavioral economics and labor market policy," IZA Journal of Labor Policy, Springer;Forschungsinstitut zur Zukunft der Arbeit GmbH (IZA), vol. 1(1), pages 1-14, December.
  • Handle: RePEc:spr:izalpo:v:1:y:2012:i:1:p:1-14:10.1186/2193-9004-1-2
    DOI: 10.1186/2193-9004-1-2
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    References listed on IDEAS

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    1. repec:zbw:rwirep:0510 is not listed on IDEAS
    2. Deborah Cobb-Clark, 2015. "Locus of control and the labor market," IZA Journal of Labor Economics, Springer;Forschungsinstitut zur Zukunft der Arbeit GmbH (IZA), vol. 4(1), pages 1-19, December.
    3. Thomas Huizen & Janneke Plantenga, 2014. "Job Search Behaviour and Time Preferences: Testing Exponential Versus Hyperbolic Discounting," De Economist, Springer, vol. 162(3), pages 223-245, September.
    4. Dorsett, Richard, 2014. "The effect of temporary in-work support on employment retention: Evidence from a field experiment," Labour Economics, Elsevier, vol. 31(C), pages 61-71.
    5. Peter Mueser & Marios Michaelides, 2015. "Are Reemployment Services Effective? Experimental Evidence from the Great Recession," Working Papers 18-04, Department of Economics, University of Missouri, revised Feb 2018.
    6. Elliott Ash, W. Bentley MacLeod, . "Intrinsic Motivation in Public Service: Theory and Evidence from State Supreme Courts," Journal of Law and Economics, University of Chicago Press, vol. 58(4).
    7. Dohmen, Thomas, 2014. "Behavioral labor economics: Advances and future directions," Labour Economics, Elsevier, vol. 30(C), pages 71-85.
    8. Kunze, Lars & Suppa, Nicolai, 2017. "Bowling alone or bowling at all? The effect of unemployment on social participation," Journal of Economic Behavior & Organization, Elsevier, vol. 133(C), pages 213-235.
    9. Lars Kunze & Nicolai Suppa, 2014. "Bowling Alone or Bowling at All? The Effect of Unemployment on Social Participation," Ruhr Economic Papers 0510, Rheinisch-Westfälisches Institut für Wirtschaftsforschung, Ruhr-Universität Bochum, Universität Dortmund, Universität Duisburg-Essen.
    10. Julie Janssens & Natascha Van Mechelen, 2017. "Who is to Blame? An Overview of the Factors Contributing to the Non-Take-Up of Social Rights," Working Papers 1708, Herman Deleeck Centre for Social Policy, University of Antwerp.
    11. Franziska Gassmann & Daphne Francois & Lorena Zardo Trindade, 2015. "Improving Labor Market Outcomes for Poor and Vulnerable Groups in Mongolia," World Bank Other Operational Studies 23671, The World Bank.
    12. Marloes Graaf-Zijl & Albert Horst & Daniel Vuuren & Hugo Erken & Rob Luginbuhl, 2015. "Long-Term Unemployment and the Great Recession in the Netherlands: Economic Mechanisms and Policy Implications," De Economist, Springer, vol. 163(4), pages 415-434, December.
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    14. Kassenboehmer, Sonja C. & Schatz, Sonja G., 2017. "Re-employment expectations and realisations: Prediction errors and behavioural responses," Labour Economics, Elsevier, vol. 44(C), pages 161-176.
    15. Cobb-Clark, Deborah A., 2016. "Biology and Gender in the Labor Market," IZA Discussion Papers 10386, Institute for the Study of Labor (IZA).
    16. World Bank Group, 2015. "Analysis of Potential Work Disincentive Effects of the Monthly Benefit for Poor Families in the Kyrgyz Republic," World Bank Other Operational Studies 22966, The World Bank.

    More about this item

    Keywords

    Behavioral economics; Unemployment insurance; Job training; Job search; JEL; D03; D04; J08; J24; J64; J65;

    JEL classification:

    • D03 - Microeconomics - - General - - - Behavioral Microeconomics: Underlying Principles
    • D04 - Microeconomics - - General - - - Microeconomic Policy: Formulation; Implementation; Evaluation
    • J08 - Labor and Demographic Economics - - General - - - Labor Economics Policies
    • J24 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Human Capital; Skills; Occupational Choice; Labor Productivity
    • J64 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Unemployment: Models, Duration, Incidence, and Job Search

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