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Disincentive Effects of Unemployment Benefits and the Role of Caseworkers

Author

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  • Schmieder, Johannes F.

    () (Boston University)

  • Trenkle, Simon

    () (IZA)

Abstract

A large literature has documented that the unemployment duration of unemployed individuals increases with the generosity of the unemployment insurance (UI) system, which has been interpreted as the disincentive effect of UI benefits. However, unemployed workers typically also have caseworkers assigned who are monitoring and assisting the job search efforts. These caseworkers may respond to differences in UI eligibility by shifting resources (financial or time) between unemployed individuals in order to counteract the moral hazard effect of UI benefits or to focus resources to where they have the largest effect. Depending on the motivations of the caseworker, the effectiveness of caseworker resources and the complementarity between these resources and UI benefits, the typical estimates of the disincentive effects of UI may be biased upwards or downwards in studies that compare workers within the same UI agency. We estimate whether caseworkers respond to the generosity of UI eligibility using a sharp regression discontinuity (RD) design in Germany, where potential UI durations vary with age. We show that across a wide variety of measures, including training programs, wage subsidies, personal meetings and sanctions, UI caseworkers do not treat unemployed with different eligibility differently. At best we find a very small effect that workers with shorter eligibility close to the exhaustion point are more likely to be assigned to training programs that prolong their UI eligibility. The typical RD estimates of the UI disincentive effects thus seem to be valid estimates.

Suggested Citation

  • Schmieder, Johannes F. & Trenkle, Simon, 2016. "Disincentive Effects of Unemployment Benefits and the Role of Caseworkers," IZA Discussion Papers 9868, Institute of Labor Economics (IZA).
  • Handle: RePEc:iza:izadps:dp9868
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    References listed on IDEAS

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    Cited by:

    1. Ann Barbara Bauer & Reiner Eichenberger, 2017. "Endogenous aging: How statutory retirement age drives human and social capital," CREMA Working Paper Series 2017-02, Center for Research in Economics, Management and the Arts (CREMA).
    2. Lichter, Andreas, 2016. "Benefit Duration and Job Search Effort: Evidence from a Natural Experiment," IZA Discussion Papers 10264, Institute of Labor Economics (IZA).
    3. DellaVigna, Stefano & Heining, Jörg & Schmieder, Johannes F. & Trenkle, Simon, "undated". "Evidence on job search models from a survey of unemployed workers in Germany," IAB Discussion Paper 202013, Institut für Arbeitsmarkt- und Berufsforschung (IAB), Nürnberg [Institute for Employment Research, Nuremberg, Germany].
    4. Schiprowski, Amelie, 2017. "The Role of Caseworkers in Unemployment Insurance: Evidence from Unplanned Absences," IZA Discussion Papers 11040, Institute of Labor Economics (IZA).
    5. Amelie Schiprowski, 2020. "The Role of Caseworkers in Unemployment Insurance: Evidence from Unplanned Absences," CESifo Working Paper Series 8206, CESifo.
    6. Amelie Schiprowski, 2020. "The Role of Caseworkers in Unemployment Insurance: Evidence from Unplanned Absences," ECONtribute Discussion Papers Series 016, University of Bonn and University of Cologne, Germany.

    More about this item

    Keywords

    caseworkers; unemployment insurance; unemployment benefits; active labor market programs;

    JEL classification:

    • J65 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Unemployment Insurance; Severance Pay; Plant Closings

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