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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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  1. Gerard J. van den Berg, 1990. "Nonstationarity in Job Search Theory," Review of Economic Studies, Oxford University Press, vol. 57(2), pages 255-277.
  2. Boone, Jan & Fredriksson, Peter & Holmlund, Bertil & van Ours, Jan C, 2001. "Optimal Unemployment Insurance with Monitoring and Sanctions," CEPR Discussion Papers 3082, C.E.P.R. Discussion Papers.
  3. Frijters, Paul & van der Klaauw, Bas, 2004. "Job Search with Nonparticipation," IZA Discussion Papers 1407, Institute for the Study of Labor (IZA).
  4. Andrey Launov & Klaus Wälde, 2013. "Estimating Incentive And Welfare Effects Of Nonstationary Unemployment Benefits," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 54, pages 1159-1198, November.
  5. Christensen, Bent Jesper & Kiefer, Nicholas M, 1994. "Measurement Error in the Prototypal Job-Search Model," Journal of Labor Economics, University of Chicago Press, vol. 12(4), pages 618-39, October.
  6. Cockx, Bart & Dejemeppe, Muriel, 2010. "The Threat of Monitoring Job Search: A Discontinuity Design," IZA Discussion Papers 5337, Institute for the Study of Labor (IZA).
  7. Boone, Jan & Sadrieh, Abdolkarim & van Ours, Jan C., 2004. "Experiments on Unemployment Benefit Sanctions and Job Search Behavior," IZA Discussion Papers 1000, Institute for the Study of Labor (IZA).
  8. Petrongolo, Barbara, 2008. "The Long-Term Effects of Job Search Requirements: Evidence from the UK JSA Reform," IZA Discussion Papers 3856, Institute for the Study of Labor (IZA).
  9. Gerard J. van den Berg & Bas van der Klaauw, 2006. "Counseling And Monitoring Of Unemployed Workers: Theory And Evidence From A Controlled Social Experiment," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 47(3), pages 895-936, 08.
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  13. Michael P. Keane & Kenneth I. Wolpin, 2006. "Exploring the Usefulness of a Non-Random Holdout Sample for Model Validation: Welfare Effects on Female Behavior," PIER Working Paper Archive 06-006, Penn Institute for Economic Research, Department of Economics, University of Pennsylvania.
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  15. repec:oup:restud:v:74:y:2007:i:1:p:283-318 is not listed on IDEAS
  16. 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.
  17. repec:inr:wpaper:155908 is not listed on IDEAS
  18. Denis Fougère & Jacqueline Pradel & Muriel Roger, 2009. "Does the public employment service affect search effort and outcomes," Université Paris1 Panthéon-Sorbonne (Post-Print and Working Papers) halshs-00824380, HAL.
  19. Ofer Setty, 2013. "Optimal Unemployment Insurance with Monitoring," 2013 Meeting Papers 26, Society for Economic Dynamics.
  20. Card, David & Chetty, Raj & Weber, Andrea, 2007. "The Spike at Benefit Exhaustion: Leaving the Unemployment System or Starting a New Job?," IZA Discussion Papers 2590, Institute for the Study of Labor (IZA).
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  25. Andreas Hornstein & Per Krusell & Giovanni L. Violante, 2011. "Frictional Wage Dispersion in Search Models: A Quantitative Assessment," American Economic Review, American Economic Association, vol. 101(7), pages 2873-98, December.
  26. Matt Jackson, 2003. "The Effects of Social Networks on Employment and Inequality," Theory workshop papers 658612000000000032, UCLA Department of Economics.
  27. Keane, Michael P. & Todd, Petra E. & Wolpin, Kenneth I., 2011. "The Structural Estimation of Behavioral Models: Discrete Choice Dynamic Programming Methods and Applications," Handbook of Labor Economics, Elsevier.
  28. H. Bunzel & B. J. Christensen & P. Jensen & N. M. Kiefer & L. Korsholm & L. Muus & G. R. Neumann & M. Rosholm, 2001. "Specification and Estimation of Equilibrium Search Models," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 4(1), pages 90-126, January.
  29. Jeff Borland & Yi-Ping Tseng, 2007. "Does a Minimum Job Search Requirement Reduce Time on Unemployment Payments? Evidence from the Jobseeker Diary in Australia," Industrial and Labor Relations Review, ILR Review, Cornell University, ILR School, vol. 60(3), pages 357-378, April.
  30. 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.
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  32. Peter Dolton & Donal O'Neill, 2002. "The Long-Run Effects of Unemployment Monitoring and Work-Search Programs: Experimental Evidence from the United Kingdom," Journal of Labor Economics, University of Chicago Press, vol. 20(2), pages 381-403, Part.
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