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Treatment Versus Regime Effects of Carrots and Sticks

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  • Arni, Patrick
  • Berg, Gerard van den
  • Lalive, Rafael

Abstract

Public Employment Service (PES) agencies and caseworkers (CW) often have substantial leeway in the design and implementation of active labor market policies (ALMP) for the unemployed, resulting in variation of usage. This paper presents a novel framework in which this variation is used for the joint assessment of different ways in which ALMP effects can operate. We examine an additional layer of impacts - beyond the treatment effects on the treated job seekers - called regime effects, which potentially affect all job seekers and which are defined by the extent to which programs are intended to be used in a market. We propose a novel method to jointly estimate regime effects for two types of programs, supportive (carrots) and restrictive (sticks) programs. We apply this to contrast regime and treatment effects on unemployment durations, employment, and post-unemployment earnings using register data that contain PES and case-worker identifiers for about 130,000 job seekers. The results show that carrots and sticks treatments prolong unemployment, but carrots increase earnings whereas sticks decrease them. We find regime effects of a similar order of magnitude. Higher intended usage of carrots and sticks reduces unemployment durations, but carrots raise earnings whereas sticks decrease them. We also find interaction effects between carrots and sticks policies. Regime effects are economically substantial. Our comprehensive cost-benefits analyses show that modest increases in the intended usage of carrots and sticks reduce the total cost of an unemployed individual by up to 10%.

Suggested Citation

  • Arni, Patrick & Berg, Gerard van den & Lalive, Rafael, 2015. "Treatment Versus Regime Effects of Carrots and Sticks," CEPR Discussion Papers 10913, C.E.P.R. Discussion Papers.
  • Handle: RePEc:cpr:ceprdp:10913
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    References listed on IDEAS

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    1. Bruno Crépon & Esther Duflo & Marc Gurgand & Roland Rathelot & Philippe Zamora, 2013. "Do Labor Market Policies have Displacement Effects? Evidence from a Clustered Randomized Experiment," The Quarterly Journal of Economics, Oxford University Press, vol. 128(2), pages 531-580.
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    3. David Card & Jochen Kluve & Andrea Weber, 2010. "Active Labour Market Policy Evaluations: A Meta-Analysis," Economic Journal, Royal Economic Society, vol. 120(548), pages 452-477, November.
    4. Gerard Van Den Berg & Antoine Bozio & Monica Costa Dias, 2013. "Policy discontinuity and duration outcomes," IFS Working Papers W13/27, Institute for Fiscal Studies.
    5. 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, July.
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    Citations

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    Cited by:

    1. Eichhorst, Werner & Konle-Seidl, Regina, 2016. "Evaluating Labour Market Policy," IZA Discussion Papers 9966, Institute for the Study of Labor (IZA).
    2. Hernæs, Øystein & Markussen, Simen & Røed, Knut, 2017. "Can welfare conditionality combat high school dropout?," Labour Economics, Elsevier, vol. 48(C), pages 144-156.
    3. Hernaes, Øystein, 2018. "Distributional Effects of Welfare Reform for Young Adults: An Unconditional Quantile Regression Approach," IZA Discussion Papers 11340, Institute for the Study of Labor (IZA).

    More about this item

    Keywords

    active labor market programs; caseworkers; earnings; employment; policy regime; treatment effect; unemployment;

    JEL classification:

    • 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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