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Carrot and Stick: How Reemployment Bonuses and Benefit Sanctions Affect Job Finding Rates

  • van der Klaauw, Bas
  • van Ours, Jan C

To increase their transition from welfare to work, benefit recipients in the municipality of Rotterdam were exposed to various financial incentives, including both carrots to sticks. Once their benefit spell exceeded one year, welfare recipients were entitled to a reemployment bonus if they found a job that lasted at least six months. However, they could also be punished for noncompliance with eligibility requirements and face a sanction, i.e. a temporary reducing of their benefits. In this paper we investigate how benefit sanctions and reemployment bonuses affect job finding rates of welfare recipients. We find that benefit sanctions were effective in bringing unemployed from welfare to work more quickly while reemployment bonuses were not.

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Paper provided by C.E.P.R. Discussion Papers in its series CEPR Discussion Papers with number 7924.

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Date of creation: Jul 2010
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Handle: RePEc:cpr:ceprdp:7924
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  1. Kluve, Jochen, 2010. "The effectiveness of European active labor market programs," Labour Economics, Elsevier, vol. 17(6), pages 904-918, December.
  2. Rafael Lalive & Jan C. van Ours & Josef Zweimüller, 2005. "The Effect Of Benefit Sanctions On The Duration Of Unemployment," Journal of the European Economic Association, MIT Press, vol. 3(6), pages 1386-1417, December.
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  5. Boockmann, Bernhard & Thomsen, Stephan L. & Walter, Thomas, 2009. "Intensifying the use of benefit sanctions: an effective tool to shorten welfare receipt and speed up transitions to employment?," ZEW Discussion Papers 09-072, ZEW - Zentrum für Europäische Wirtschaftsforschung / Center for European Economic Research.
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  19. Svarer, Michael, 2007. "The Effect of Sanctions on the Job Finding Rate: Evidence from Denmark," IZA Discussion Papers 3015, Institute for the Study of Labor (IZA).
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  26. Jensen, Peter & Rosholm, Michael & Svarer, Michael, 2003. "The response of youth unemployment to benefits, incentives, and sanctions," European Journal of Political Economy, Elsevier, vol. 19(2), pages 301-316, June.
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  28. McVicar, Duncan, 2008. "Job search monitoring intensity, unemployment exit and job entry: Quasi-experimental evidence from the UK," Labour Economics, Elsevier, vol. 15(6), pages 1451-1468, December.
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