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The Role of Sickness in the Evaluation of Job Search Assistance and Sanctions

Listed author(s):
  • Berg, Gerard van den
  • Hofmann, Barbara
  • Uhlendorff, Arne

Unemployment insurance agencies may combat moral hazard by punishing refusals to apply to assigned vacancies. However, the possibility to report sick creates an additional moral hazard, since during sickness spells, minimum requirements on search behavior do not apply. This reduces the ex ante threat of sanctions. We analyze the effects of vacancy referrals and sanctions on the unemployment duration and the quality of job matches, in conjunction with the possibility to report sick. We estimate multi-spell duration models with selection on unobserved characteristics. We find that vacancy referrals increase the transition to work and that these jobs go along with a lower wage. However, we also find a positive effect of receiving a vacancy referral on the probability of reporting sick. This effect is smaller at high durations, which suggests that the value of a vacancy referral increases over the time spent in unemployment. Overall, around 9% of sickness absence during unemployment is induced by vacancy referrals.

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Paper provided by C.E.P.R. Discussion Papers in its series CEPR Discussion Papers with number 11039.

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Date of creation: Jan 2016
Handle: RePEc:cpr:ceprdp:11039
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  15. Eichhorst, Werner & Grienberger-Zingerle, Maria & Konle-Seidl, Regina, 2006. "Activation Policies in Germany: From Status Protection to Basic Income Support," IZA Discussion Papers 2514, Institute for the Study of Labor (IZA).
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