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

  • van der Klaauw, Bas

    ()

    (VU University Amsterdam)

  • van Ours, Jan C.

    ()

    (Tilburg University)

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 Institute for the Study of Labor (IZA) in its series IZA Discussion Papers with number 5055.

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Length: 31 pages
Date of creation: Jul 2010
Date of revision:
Publication status: published in: Journal of Applied Econometrics, 2013, 28 (2), 275–296
Handle: RePEc:iza:izadps:dp5055
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  1. Hanming Fang & Dan Silverman, 2004. "Time-inconsistency and Welfare Program Participation: Evidence from the NLSY," Cowles Foundation Discussion Papers 1465, Cowles Foundation for Research in Economics, Yale University.
  2. van den Berg, Gerard J & van der Klaauw, Bas & van Ours, Jan C, 2000. "Punitive Sanctions and the Transition Rate From Welfare to Work," CEPR Discussion Papers 2447, C.E.P.R. Discussion Papers.
  3. Paul T. Decker & Christopher J. L'Leary, 1995. "Evaluating Pooled Evidence from the Reemployment Bonus Experiments," Journal of Human Resources, University of Wisconsin Press, vol. 30(3), pages 534-550.
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  7. 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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  9. Bruce D. Meyer, 1995. "Lessons from the U.S. Unemployment Insurance Experiments," Journal of Economic Literature, American Economic Association, vol. 33(1), pages 91-131, March.
  10. Anderson, Patricia M, 1992. "Time-Varying Effects of Recall Expectation, a Reemployment Bonus, and Job Counseling on Unemployment Durations," Journal of Labor Economics, University of Chicago Press, vol. 10(1), pages 99-115, January.
  11. 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.
  12. David Card & Dean R. Hyslop, 2004. "Estimating the Effects of a Time Limited Earnings Subsidy for Welfare Leavers," NBER Working Papers 10647, National Bureau of Economic Research, Inc.
  13. 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).
  14. Patrick Arni & Rafael Lalive & Jan C. Van Ours, 2013. "How Effective Are Unemployment Benefit Sanctions? Looking Beyond Unemployment Exit," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 28(7), pages 1153-1178, November.
  15. Bijwaard, Govert E. & Ridder, Geert, 2005. "Correcting for selective compliance in a re-employment bonus experiment," Journal of Econometrics, Elsevier, vol. 125(1-2), pages 77-111.
  16. David E. Card & Jochen Kluve & Andrea Weber, 2009. "Active Labor Market Policy Evaluations: A Meta-analysis," NRN working papers 2009-02, The Austrian Center for Labor Economics and the Analysis of the Welfare State, Johannes Kepler University Linz, Austria.
  17. Kluve, Jochen, 2010. "The effectiveness of European active labor market programs," Labour Economics, Elsevier, vol. 17(6), pages 904-918, December.
  18. 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.
  19. Gerard van den Berg & Antoine Bozio & Monica Costa Dias, 2013. "Policy discontinuity and duration outcomes," IFS Working Papers W13/27, Institute for Fiscal Studies.
  20. van den Berg, Gerard J. & Vikström, Johan, 2009. "Monitoring job offer decisions, punishments, exit to work, and job quality," Working Paper Series 2009:18, IFAU - Institute for Evaluation of Labour Market and Education Policy.
  21. repec:mpr:mprres:1978 is not listed on IDEAS
  22. 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.
  23. Stefano DellaVigna & M. Daniele Paserman, 2004. "Job Search and Impatience," NBER Working Papers 10837, National Bureau of Economic Research, Inc.
  24. Christopher J. O'Leary & Robert G. Spiegelman & Kenneth J. Kline, . "Do Bonus Offers Shorten Unemployment Insurance Spells? Results from the Washington Experiment," Upjohn Working Papers and Journal Articles cjo19954, W.E. Upjohn Institute for Employment Research.
  25. Paul T. Decker, 1994. "The Impact of Reemployment Bonuses on Insured Unemployment in the New Jersey and Illinois Reemployment Bonus Experiments," Journal of Human Resources, University of Wisconsin Press, vol. 29(3), pages 718-741.
  26. Jaap H. Abbring & Gerard J. van den Berg, 2003. "The Nonparametric Identification of Treatment Effects in Duration Models," Econometrica, Econometric Society, vol. 71(5), pages 1491-1517, 09.
  27. 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.
  28. Yannis Bilias, 2000. "Sequential testing of duration data: the case of the Pennsylvania 'reemployment bonus' experiment," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 15(6), pages 575-594.
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