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Monitoring, Sanctions and Front-Loading of Job Search in a Non-Stationary Model

  • Cockx, Bart


    (Ghent University)

  • Dejemeppe, Muriel


    (Université catholique de Louvain)

  • Launov, Andrey


    (University of Mainz)

  • Van der Linden, Bruno


    (IRES, Université catholique de Louvain)

We develop and estimate a non-stationary job search model to evaluate a 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 Institute for the Study of Labor (IZA) in its series IZA Discussion Papers with number 6181.

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Length: 44 pages
Date of creation: Nov 2011
Date of revision:
Handle: RePEc:iza:izadps:dp6181
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  7. Boone, Jan & Fredriksson, Peter & Holmlund, Bertil & van Ours, Jan, 2001. "Optimal Unemployment Insurance with Monitoring and Sanctions," Working Paper Series 2001:20, Uppsala University, Department of Economics.
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  17. van der Klaauw, Bas & van Vuuren, Aico, 2010. "Job search and academic achievement," European Economic Review, Elsevier, vol. 54(2), pages 294-316, February.
  18. Antoni Calvó-Armengol & Matthew O. Jackson, 2004. "The Effects of Social Networks on Employment and Inequality," American Economic Review, American Economic Association, vol. 94(3), pages 426-454, June.
  19. Boone, Jan & Sadrieh, Abdolkarim & van Ours, Jan C, 2004. "Experiments on Unemployment Benefit Sanctions and Job Search Behaviour," CEPR Discussion Papers 4298, C.E.P.R. Discussion Papers.
  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).
  21. Michael P. Keane & Kenneth I. Wolpin, 2007. "Exploring The Usefulness Of A Nonrandom Holdout Sample For Model Validation: Welfare Effects On Female Behavior," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 48(4), pages 1351-1378, November.
  22. 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.
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  24. Andreas Hornstein & Per Krusell & Giovanni L. Violante, 2007. "Frictional Wage Dispersion in Search Models: A Quantitative Assessment," NBER Working Papers 13674, National Bureau of Economic Research, Inc.
  25. Eckstein, Zvi & Mortensen, Dale T., 2006. "Labor search," European Economic Review, Elsevier, vol. 50(4), pages 807-810, May.
  26. Fuss, Catherine, 2009. "What is the most flexible component of wage bill adjustment? Evidence from Belgium," Labour Economics, Elsevier, vol. 16(3), pages 320-329, June.
  27. 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.
  28. Bart COCKX & Muriel DEJEMEPPE, 2010. "The Threat of Monitoring Job Search. A Discontinuity Design," Discussion Papers (IRES - Institut de Recherches Economiques et Sociales) 2010041, Université catholique de Louvain, Institut de Recherches Economiques et Sociales (IRES).
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  30. 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.
  31. 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.
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