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

  • Bart Cockx

    (Sherppa, Ghent U., IZA and CESIfo)

  • Muriel Dejemeppe

    (IRES, Universit´e catholique de Louvain)

  • Andrey Launov

    ()

    (Department of Economics, Johannes Gutenberg-Universitaet Mainz, Germany)

  • Bruno Van der Linden

    (IRES, Universit´e catholique de Louvain, FNRS and IZA)

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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File URL: http://www.macro.economics.uni-mainz.de/RePEc/pdf/Discussion_Paper_1114.pdf
File Function: First version, 2011
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Paper provided by Gutenberg School of Management and Economics, Johannes Gutenberg-Universität Mainz in its series Working Papers with number 1114.

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Length: 42 pages
Date of creation: 21 Nov 2011
Date of revision: 21 Nov 2011
Handle: RePEc:jgu:wpaper:1114
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  1. van der Klaauw, Bas & van Vuuren, Aico, 2010. "Job search and academic achievement," European Economic Review, Elsevier, vol. 54(2), pages 294-316, February.
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  7. Andrey Launov & Klaus Wälde, 2010. "Estimating Incentive and Welfare Effects of Non-Stationary Unemployment Benefits," CESifo Working Paper Series 3069, CESifo Group Munich.
  8. 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).
  9. 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.
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  12. Jan Boone & Jan C. van Ours, 2000. "Modeling Financial Incentives to Get Unemployed Back to Work," Econometric Society World Congress 2000 Contributed Papers 0973, Econometric Society.
  13. 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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  16. Boone, Jan & Fredriksson, Peter & Holmlund, Bertil & van Ours, Jan, 2002. "Optimal unemployment insurance with monitoring and sanctions," Working Paper Series 2002:21, IFAU - Institute for Evaluation of Labour Market and Education Policy.
  17. David Card & Raj Chetty & Andrea Weber, 2007. "The Spike at Benefit Exhaustion: Leaving the Unemployment System or Starting a New Job?," NBER Working Papers 12893, National Bureau of Economic Research, Inc.
  18. 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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  22. Setty, Ofer, 2009. "Optimal Unemployment Insurance with Monitoring," MPRA Paper 18188, University Library of Munich, Germany.
  23. 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.
  24. 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.
  25. 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.
  26. Giovanni L. Violante & Per Krusell & Andreas Hornstein, 2006. "Frictional wage dispersion in search models: a quantitative assessment," Working Paper 06-07, Federal Reserve Bank of Richmond.
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  30. repec:inr:wpaper:155908 is not listed on IDEAS
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