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The role of sickness in the evaluation of job search assistance and sanctions

Listed author(s):
  • van den Berg, Gerard J.

    ()

    (University of Bristol, IFAU Uppsala, IZA, ZEW, CEPR)

  • Hofmann, Barbara

    (University of Mannheim, IAB Nuremberg)

  • Uhlendorff, Arne

    (CNRS, CREST, IAB Nuremberg, DIW, IZA)

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. Based on a large inflow sample into unemployment of male job seekers in West Germany in the year 2000, 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 multispell duration models with selection on unobserved characteristics. We find that a vacancy referral increases the transition rate into work and that such accepted jobs go along with lower wages. We also find a positive effect of a vacancy referral on the probability of reporting sick. This effect is smaller at high durations, which suggests that the relative attractiveness of vacancy referrals increases over the time spent in unemployment. In our setting, with relatively severe sanctions, around 9 percent of sickness absence during unemployment is induced by vacancy referrals.

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File URL: http://www.ifau.se/globalassets/pdf/se/2017/wp2017-01-the-role-of-sickness-in-the-evaluation-of-job-search-assistance-and-sanctions.pdf
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Paper provided by IFAU - Institute for Evaluation of Labour Market and Education Policy in its series Working Paper Series with number 2017:1.

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Length: 54 pages
Date of creation: 10 Jan 2017
Handle: RePEc:hhs:ifauwp:2017_001
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