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

  • B. COCKX

    ()

  • M. DEJEMEPPE
  • A. LAUNOV

    ()

  • B. VAN DER LINDEN

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 insuffcient. 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 Ghent University, Faculty of Economics and Business Administration in its series Working Papers of Faculty of Economics and Business Administration, Ghent University, Belgium with number 11/761.

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Length: 43 pages
Date of creation: Nov 2011
Date of revision:
Handle: RePEc:rug:rugwps:11/761
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Web page: http://www.ugent.be/eb

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  1. Andrey Launov & Klaus Wälde, 2013. "Estimating Incentive And Welfare Effects Of Nonstationary Unemployment Benefits," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 54, pages 1159-1198, November.
  2. B. Cockx & M. Dejemeppe, 2010. "The Threat of Monitoring Job Search. A Discontinuity Design," Working Papers of Faculty of Economics and Business Administration, Ghent University, Belgium 10/685, Ghent University, Faculty of Economics and Business Administration.
  3. 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.
  4. Postel-Vinay, Fabien & Robin, Jean-Marc, 2002. "Equilibrium Wage Dispersion with Worker and Employer Heterogeneity," CEPR Discussion Papers 3548, C.E.P.R. Discussion Papers.
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  7. 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).
  8. 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.
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  11. Jan Boone & Peter Fredriksson & Bertil Holmlund & Jan C. van Ours, 2001. "Optimal Unemployment Insurance with Monitoring and Sanctions," CESifo Working Paper Series 616, CESifo Group Munich.
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  14. Gerard J. van den Berg & Bas van der Klaauw, 2006. "Counseling And Monitoring Of Unemployed Workers: Theory And Evidence From A Controlled Social Experiment," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 47(3), pages 895-936, 08.
  15. 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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  17. 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.
  18. Conny Wunsch, 2009. "Optimal Use of Labor Market Policies: The Role of Job Search Assistance," CESifo Working Paper Series 2890, CESifo Group Munich.
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  24. 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.
  25. 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.
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  28. repec:dgr:kubcen:200185 is not listed on IDEAS
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