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Does the Unemployment Benefit Institution affect the Productivity of Workers? Evidence from a Field Experiment

  • Blanco, Mariana

    (University of Rosario)

  • Dalton, Patricio S.

    (Tilburg University)

  • Vargas, Juan F.

    (University of Rosario)

We investigate whether and how the type of unemployment benefit institution affects productivity. We designed a field experiment to compare workers' productivity under a welfare system, where the unemployed receive an unconditional monetary transfer, with their productivity under a workfare system, where the transfer is received conditional on the unemployed spending some time on ancillary activities. First, we find that having an unemployment benefit institution, regardless of whether it makes transfers conditional or unconditional, increases workers' productivity. Second, we find that productivity is higher under Welfare than under Workfare. Becoming unemployed under Welfare comes at the psychological cost of a drop in self-esteem, presumably due to the shame or stigma associated with receiving an unconditional unemployment benefit. We document the empirical relevance of precisely this channel. The differences we observe in productivity suggest that this psychological cost acts as an extra non- monetary incentive for workers under Welfare to put a higher effort in their work.

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Paper provided by Competitive Advantage in the Global Economy (CAGE) in its series CAGE Online Working Paper Series with number 178.

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Date of creation: 2013
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Handle: RePEc:cge:wacage:178
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  1. Botond Köszegi, 2006. "Ego Utility, Overconfidence, and Task Choice," Journal of the European Economic Association, MIT Press, vol. 4(4), pages 673-707, 06.
  2. 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.
  3. Peter Fredriksson & Bertil Holmlund, 2003. "Improving Incentives in Unemployment Insurance: A Review of Recent Research," CESifo Working Paper Series 922, CESifo Group Munich.
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  5. Gneezy, Uri & Rustichini, Aldo, 2000. "A Fine is a Price," The Journal of Legal Studies, University of Chicago Press, vol. 29(1), pages 1-17, January.
  6. David Andolfatto & Steeve Mongrain & Gordon Myers, 2009. "Rational truth-avoidance and self-esteem," Canadian Journal of Economics, Canadian Economics Association, vol. 42(1), pages 141-154, February.
  7. Oswald, Andrew J. & Proto, Eugenio & Sgroi, Daniel, 2008. "Happiness and Productivity," The Warwick Economics Research Paper Series (TWERPS) 882, University of Warwick, Department of Economics.
  8. Canice Prendergast, 1999. "The Provision of Incentives in Firms," Journal of Economic Literature, American Economic Association, vol. 37(1), pages 7-63, March.
  9. Bandiera, Oriana & Barankay, Iwan & Rasul, Imran, 2006. "Incentives for Managers and Inequality Among Workers: Evidence from a Firm Level Experiment," CEPR Discussion Papers 5649, C.E.P.R. Discussion Papers.
  10. Shapiro, Carl & Stiglitz, Joseph E, 1984. "Equilibrium Unemployment as a Worker Discipline Device," American Economic Review, American Economic Association, vol. 74(3), pages 433-44, June.
  11. Dan A. Black & Jeffrey A. Smith & Mark C. Berger & Brett J. Noel, 2003. "Is the Threat of Reemployment Services More Effective Than the Services Themselves? Evidence from Random Assignment in the UI System," American Economic Review, American Economic Association, vol. 93(4), pages 1313-1327, September.
  12. Edward Miguel & Michael Kremer, 2004. "Worms: Identifying Impacts on Education and Health in the Presence of Treatment Externalities," Econometrica, Econometric Society, vol. 72(1), pages 159-217, 01.
  13. Gueron, Judith M, 1990. "Work and Welfare: Lessons on Employment Programs," Journal of Economic Perspectives, American Economic Association, vol. 4(1), pages 79-98, Winter.
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