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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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  28. repec:mpr:mprres:1978 is not listed on IDEAS
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