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

44 Pages Posted: 17 Dec 2011

See all articles by Bart Cockx

Bart Cockx

Ghent University - Department of Economics; Institute for the Study of Labor (IZA); CESifo (Center for Economic Studies and Ifo Institute); IRES, Université Catholique de Louvain; ROA Maastricht University

Muriel Dejemeppe

Catholic University of Louvain - School of Economic and Social Research

Andrey Launov

University of Wuerzburg; IZA Institute of Labor Economics

Bruno Van der Linden

Université Catholique de Louvain - Institut de Recherches Economiques et Sociales; IZA Institute of Labor Economics

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Abstract

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.

Keywords: monitoring, sanctions, non-stationary job search, unemployment benefits, structural estimation

JEL Classification: J64, J68, C41

Suggested Citation

Cockx, Bart L. W. and Dejemeppe, Muriel and Launov, Andrey and Van der Linden, Bruno, Monitoring, Sanctions and Front-Loading of Job Search in a Non-Stationary Model. IZA Discussion Paper No. 6181, Available at SSRN: https://ssrn.com/abstract=1973910 or http://dx.doi.org/10.2139/ssrn.1973910

Bart L. W. Cockx (Contact Author)

Ghent University - Department of Economics ( email )

Ghent, B-9000
Belgium

Institute for the Study of Labor (IZA)

P.O. Box 7240
Bonn, D-53072
Germany

CESifo (Center for Economic Studies and Ifo Institute)

Poschinger Str. 5
Munich, DE-81679
Germany

IRES, Université Catholique de Louvain

Place Montesquieu, 3
Louvain-la-Neuve
Belgium

ROA Maastricht University ( email )

P.O. Box 616
Maastricht, MD6200
Netherlands

Muriel Dejemeppe

Catholic University of Louvain - School of Economic and Social Research ( email )

3, Place Montesquieu
1348 Louvain-la-Neuve
Belgium
+32 10 47 41 00 (Phone)
+32 10 47 39 45 (Fax)

Andrey Launov

University of Wuerzburg ( email )

Sanderring 2
Würzburg, D-97070
Germany

IZA Institute of Labor Economics

P.O. Box 7240
Bonn, D-53072
Germany

Bruno Van der Linden

Université Catholique de Louvain - Institut de Recherches Economiques et Sociales ( email )

3, Place Montesquieu
Louvain-la-Neuve, 1348
Belgium

HOME PAGE: http://perso.uclouvain.be/bruno.vanderlinden/

IZA Institute of Labor Economics

P.O. Box 7240
Bonn, D-53072
Germany

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