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Carrot and Stick: How Reemployment Bonuses and Benefit Sanctions Affect Job Finding Rates

Author

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  • van der Klaauw, Bas

    (Vrije Universiteit Amsterdam)

  • van Ours, Jan C.

    (Erasmus School of Economics)

Abstract

To increase their transition from welfare to work, benefit recipients in the municipality of Rotterdam were exposed to various financial incentives, including both carrots to sticks. Once their benefit spell exceeded one year, welfare recipients were entitled to a reemployment bonus if they found a job that lasted at least six months. However, they could also be punished for noncompliance with eligibility requirements and face a sanction, i.e. a temporary reducing of their benefits. In this paper we investigate how benefit sanctions and reemployment bonuses affect job finding rates of welfare recipients. We find that benefit sanctions were effective in bringing unemployed from welfare to work more quickly while reemployment bonuses were not.

Suggested Citation

  • van der Klaauw, Bas & van Ours, Jan C., 2010. "Carrot and Stick: How Reemployment Bonuses and Benefit Sanctions Affect Job Finding Rates," IZA Discussion Papers 5055, Institute of Labor Economics (IZA).
    • Handle: RePEc:iza:izadps:dp5055
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    References listed on IDEAS

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    Cited by:

    1. Alessio Brown & Johannes Koettl, 2015. "Active labor market programs - employment gain or fiscal drain?," IZA Journal of Labor Economics, Springer;Forschungsinstitut zur Zukunft der Arbeit GmbH (IZA), vol. 4(1), pages 1-36, December.
    2. David Robalino & Michael Weber, 2013. "Designing and implementing unemployment benefit systems in middle and low income countries: beyond risk-pooling vs savings," IZA Journal of Labor Policy, Springer;Forschungsinstitut zur Zukunft der Arbeit GmbH (IZA), vol. 2(1), pages 1-20, December.
    3. Andrew Wright & Brian Dollery, 2020. "The impact of varying penalty values on compliance with unemployment payment requirements: An analysis using 2015/16 Australian National Data," Australian Journal of Labour Economics (AJLE), Bankwest Curtin Economics Centre (BCEC), Curtin Business School, vol. 23(1), pages 1-20.

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    More about this item

    Keywords

    dynamic selection; welfare to work; financial incentives; timing-of-events;
    All these keywords.

    JEL classification:

    • J64 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Unemployment: Models, Duration, Incidence, and Job Search
    • C21 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Cross-Sectional Models; Spatial Models; Treatment Effect Models
    • C41 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods: Special Topics - - - Duration Analysis; Optimal Timing Strategies

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