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Monitoring, Sanctions and Front-Loading of Job Search in a Non-Stationary Model

  • Bart COCKX

    ()

    (Sherppa,Ghent Universiteit,IZA and CESIfo)

  • Muriel DEJEMEPPE

    ()

    (UNIVERSITE CATHOLIQUE DE LOUVAIN, Institut de Recherches Economiques et Sociales (IRES))

  • Andrey LAUNOV

    ()

    (University of Mainz, Mainz School of Management and Economics, IZA and CESIfo)

  • Bruno VAN DER LINDEN

    ()

    (UNIVERSITE CATHOLIQUE DE LOUVAIN, Institut de Recherches Economiques et Sociales (IRES), FNRS and IZA)

We develop and estimate a non-stationary job search model to evaluate as scheme that monitors job search effort and sanctions insured unemployed whose effort is deemed insufficient. The model reveals that such schemes provide incentives to the unemployed to front-load search effort prior to monitoring. This causes the job finding rate to increase above the post sanction level. After validating the model both internally and externally, we conclude that the scheme is effective in raising the job finding rate with minor wage losses. A basic cost-benefit analysis demonstrates that welfare losses for the unemployed are compensated by net efficiency gains for public authorities and society.

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Paper provided by Université catholique de Louvain, Institut de Recherches Economiques et Sociales (IRES) in its series Discussion Papers (IRES - Institut de Recherches Economiques et Sociales) with number 2011042.

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Length: 42
Date of creation: 21 Nov 2011
Date of revision:
Handle: RePEc:ctl:louvir:2011042
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