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Modeling Financial Incentives to Get Unemployed Back to Work

Author

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  • Boone, Jan

    () (Tilburg University)

  • van Ours, Jan C.

    () (Erasmus University Rotterdam)

Abstract

We model how unemployment benefit sanctions - benefit reductions that are imposed if unemployed do not comply with job search guidelines - affect unemployment. In our analysis we find that not only micro effects concerning the behavior of individual unemployed workers are relevant, but also macro-spillover effects from the additional creation of vacancies, which originates from the increased effectiveness of labor supply. We advocate that for a given loss in welfare for the unemployed benefit sanctions are more effective in reducing unemployment than an across the board reduction in the replacement rate.

Suggested Citation

  • Boone, Jan & van Ours, Jan C., 2000. "Modeling Financial Incentives to Get Unemployed Back to Work," IZA Discussion Papers 108, Institute for the Study of Labor (IZA).
  • Handle: RePEc:iza:izadps:dp108
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    Keywords

    financial incentives; Unemployment benefits; sanctions;

    JEL classification:

    • H55 - Public Economics - - National Government Expenditures and Related Policies - - - Social Security and Public Pensions
    • J65 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Unemployment Insurance; Severance Pay; Plant Closings
    • J68 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Public Policy

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