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Optimal Use of Labor Market Policies: The Role of Job Search Assistance

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  • Conny Wunsch

Abstract

This paper studies the role of job search assistance programs in optimal welfare-to-work programs. The analysis is based on a framework, that allows for endogenous choice of benefit types and levels, wage taxes or subsidies, and activation measures such as monitoring and job search assistance for each period of unemployment in a dynamic environment with negative duration dependence in the exit rates to employment and potential depreciation in reemployment wages. We show that the main role of job search assistance is to delay or prevent situations in which it is no longer optimal to incentivize the worker to provide positive search effort. It is used to restore or maintain some minimum exit rate to employment which increases with the cost-effectiveness of job search assistance. We also find that in line with existing policies, these programs should mainly be used at the beginning of unemployment and for short durations. However, contrary to existing schemes, they should be exclusively targeted at unemployed workers with low initial exit rates to employment. For all other workers, they should only be used if they fail to find a job within reasonable time despite high expected initial exit rates.

Suggested Citation

  • Conny Wunsch, 2009. "Optimal Use of Labor Market Policies: The Role of Job Search Assistance," CESifo Working Paper Series 2890, CESifo.
  • Handle: RePEc:ces:ceswps:_2890
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    Cited by:

    1. Bart Cockx & Muriel Dejemeppe & Andrey Launov & Bruno Van der Linden, 2018. "Imperfect Monitoring of Job Search: Structural Estimation and Policy Design," Journal of Labor Economics, University of Chicago Press, vol. 36(1), pages 75-120.
    2. Forslund, Anders & Fredriksson, Peter & Vikström, Johan, 2011. "What active labor market policy works in a recession?," Working Paper Series 2011:2, IFAU - Institute for Evaluation of Labour Market and Education Policy.
    3. Huber, Martin & Lechner, Michael & Wunsch, Conny, 2015. "Workplace health promotion and labour market performance of employees," Journal of Health Economics, Elsevier, vol. 43(C), pages 170-189.
    4. Bart COCKX & Muriel DEJEMEPPE & Andrey LAUNOV & Bruno VAN DER LINDEN, 2011. "Monitoring, Sanctions and Front-Loading of Job Search in a Non-Stationary Model," LIDAM Discussion Papers IRES 2011042, Université catholique de Louvain, Institut de Recherches Economiques et Sociales (IRES).
    5. Nicola Pavoni & Ofer Setty & Giovanni Violante, 2016. "The design of 'soft' welfare-to-work programs," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 20, pages 160-180, April.
    6. Alessio Brown & Johannes Koettl, 2015. "Active labor market programs - employment gain or fiscal drain?," IZA Journal of Labor Economics, Springer;Forschungsinstitut zur Zukunft der Arbeit GmbH (IZA), vol. 4(1), pages 1-36, December.
    7. Boockmann, Bernhard & Osiander, Christopher & Stops, Michael & Verbeek, Hans, 2013. "Effekte von Vermittlerhandeln und Vermittlerstrategien im SGB II und SGB III (Pilotstudie) : Abschlussbericht an das IAB durch das Institut für Angewandte Wirtschaftsforschung e. V. (IAW), Tübingen," IAB-Forschungsbericht 201307, Institut für Arbeitsmarkt- und Berufsforschung (IAB), Nürnberg [Institute for Employment Research, Nuremberg, Germany].
    8. Bernhard Boockmann & Tobias Brändle, 2019. "Coaching, Counseling, Case‐Working: Do They Help the Older Unemployed Out of Benefit Receipt and Back Into the Labor Market?," German Economic Review, Verein für Socialpolitik, vol. 20(4), pages 436-468, November.
    9. Burt S. Barnow & Jeffrey Smith, 2015. "Employment and Training Programs," NBER Chapters, in: Economics of Means-Tested Transfer Programs in the United States, Volume 2, pages 127-234, National Bureau of Economic Research, Inc.
    10. Huber, Martin & Lechner, Michael & Wunsch, Conny, 2013. "The effect of firms' partial retirement policies on the labour market outcomes of their employees," Working papers 2013/12, Faculty of Business and Economics - University of Basel.
    11. Blázquez, Maite & Herrarte, Ainhoa & Sáez, Felipe, 2019. "Training and job search assistance programmes in Spain: The case of long-term unemployed," Journal of Policy Modeling, Elsevier, vol. 41(2), pages 316-335.
    12. Gerard J. van den Berg & Bas van der Klaauw, 2019. "Structural Empirical Evaluation Of Job Search Monitoring," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 60(2), pages 879-903, May.
    13. Pavoni, Nicola & Setty, Ofer & Violante, Giovanni L., 2010. "Search and Work in Optimal Welfare Programs," Foerder Institute for Economic Research Working Papers 275749, Tel-Aviv University > Foerder Institute for Economic Research.
    14. Bernhard Boockmann & Christopher Osiander & Michael Stops, 2014. "Vermittlerstrategien und Arbeitsmarkterfolg – Evidenz aus kombinierten Prozess- und Befragungsdaten [Caseworkers’ strategies and clients’ labor market outcomes]," Journal for Labour Market Research, Springer;Institute for Employment Research/ Institut für Arbeitsmarkt- und Berufsforschung (IAB), vol. 47(4), pages 341-360, December.
    15. Riemer P. Faber & Pierre Koning, 2017. "Why not fully spend a conditional block grant?," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 24(1), pages 60-95, February.
    16. Spinnewijn, Johannes, 2013. "Training and search during unemployment," Journal of Public Economics, Elsevier, vol. 99(C), pages 49-65.
    17. Ulrike Huemer & Rainer Eppel & Marion Kogler & Helmut Mahringer & Lukas Schmoigl & David Pichler, 2021. "Effektivität von Instrumenten der aktiven Arbeitsmarktpolitik in unterschiedlichen Konjunkturphasen," WIFO Studies, WIFO, number 67250, June.
    18. Unay-Gailhard, İlkay, 2016. "Job access after leaving education: A comparative analysis of young women and men in rural Germany," EconStor Open Access Articles and Book Chapters, ZBW - Leibniz Information Centre for Economics, pages 1355-1381.
    19. Rainer Eppel & Helmut Mahringer, 2019. "Getting a lot out of a little bit of work? The effects of marginal employment during unemployment," Empirica, Springer;Austrian Institute for Economic Research;Austrian Economic Association, vol. 46(2), pages 381-408, May.

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    More about this item

    Keywords

    job search; optimal unemployment insurance; welfare-to-work policies; recursive contracts;
    All these keywords.

    JEL classification:

    • D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design
    • D86 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Economics of Contract Law
    • J64 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Unemployment: Models, Duration, Incidence, and Job Search
    • J65 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Unemployment Insurance; Severance Pay; Plant Closings
    • J68 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Public Policy

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