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

Tinbergen Institute Discussion Paper 10-064/3

CentER Discussion Paper Series No. 2010-66

30 Pages Posted: 9 Jul 2010 Last revised: 16 Jul 2010

See all articles by Bas van der Klaauw

Bas van der Klaauw

VU University Amsterdam - Department of Economics; Centre for Economic Policy Research (CEPR); IZA Institute of Labor Economics; Tinbergen Institute

Jan C. van Ours

Tilburg University - Department of Economics; University of Melbourne - Department of Economics

Multiple version iconThere are 3 versions of this paper

Date Written: July 7, 2010

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.

Keywords: welfare to work, financial incentives, timing-of-events, dynamic selection

JEL Classification: J64, C21, C41

Suggested Citation

van der Klaauw, Bas and van Ours, Jan C., Carrot and Stick: How Reemployment Bonuses and Benefit Sanctions Affect Job Finding Rates (July 7, 2010). Tinbergen Institute Discussion Paper 10-064/3. Available at SSRN: https://ssrn.com/abstract=1636263 or http://dx.doi.org/10.2139/ssrn.1636263

Bas Van der Klaauw (Contact Author)

VU University Amsterdam - Department of Economics ( email )

De Boelelaan 1105
1081 HV Amsterdam
Netherlands
+31 20 444 6120 (Phone)
+31 20 444 6005 (Fax)

Centre for Economic Policy Research (CEPR)

London
United Kingdom

IZA Institute of Labor Economics

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

Tinbergen Institute

Burg. Oudlaan 50
Rotterdam, 3062 PA
Netherlands

Jan C. Van Ours

Tilburg University - Department of Economics ( email )

P.O. Box 90153
Tilburg, 5000 LE
Netherlands
+31 13 466 2880 (Phone)
+31 13 466 3042 (Fax)

University of Melbourne - Department of Economics ( email )

Melbourne, 3010
Australia

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