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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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  1. Conny Wunsch, 2009. "Optimal Use of Labor Market Policies: The Role of Job Search Assistance," CESifo Working Paper Series 2890, CESifo Group Munich.
  2. Boone, Jan & Sadrieh, Abdolkarim & van Ours, Jan C., 2004. "Experiments on Unemployment Benefit Sanctions and Job Search Behavior," IZA Discussion Papers 1000, Institute for the Study of Labor (IZA).
  3. Cockx, Bart & Dejemeppe, Muriel, 2010. "The Threat of Monitoring Job Search: A Discontinuity Design," IZA Discussion Papers 5337, Institute for the Study of Labor (IZA).
  4. Boone, Jan & Fredriksson, Peter & Holmlund, Bertil & van Ours, Jan C., 2001. "Optimal Unemployment Insurance with Monitoring and Sanctions," IZA Discussion Papers 401, Institute for the Study of Labor (IZA).
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  16. 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.
  17. Michael P. Keane & Kenneth I. Wolpin, 2006. "Exploring the Usefulness of a Non-Random Holdout Sample for Model Validation: Welfare Effects on Female Behavior," PIER Working Paper Archive 06-006, Penn Institute for Economic Research, Department of Economics, University of Pennsylvania.
  18. 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).
  19. Petrongolo, Barbara, 2008. "The long-term effects of job search requirements: Evidence from the UK JSA reform," CEPR Discussion Papers 7067, C.E.P.R. Discussion Papers.
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  21. Dolton, Peter & O'Neill, Donal, 1996. "Unemployment Duration and the Restart Effect: Some Experimental Evidence," Economic Journal, Royal Economic Society, vol. 106(435), pages 387-400, March.
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  24. 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.
  25. Fabien Postel-Vinay & Jean-Marc Robin, 2002. "Equilibrium Wage Dispersion with Worker and Employer Heterogeneity," Econometrica, Econometric Society, vol. 70(6), pages 2295-2350, November.
  26. Fougère, Denis & Pradel, Jacqueline & Roger, Muriel, 2008. "Does the Public Employment Service Affect Search Effort and Outcomes?," CEPR Discussion Papers 7095, C.E.P.R. Discussion Papers.
  27. 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.
  28. H. Bunzel & B. J. Christensen & P. Jensen & N. M. Kiefer & L. Korsholm & L. Muus & G. R. Neumann & M. Rosholm, 2001. "Specification and Estimation of Equilibrium Search Models," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 4(1), pages 90-126, January.
  29. Eckstein, Zvi & Mortensen, Dale T., 2006. "Labor search," European Economic Review, Elsevier, vol. 50(4), pages 807-810, May.
  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. 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.
  32. Christensen, Bent Jesper & Kiefer, Nicholas M, 1994. "Measurement Error in the Prototypal Job-Search Model," Journal of Labor Economics, University of Chicago Press, vol. 12(4), pages 618-39, October.
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