Does the Unemployment Benefit Institution affect the Productivity of Workers? Evidence from a Field Experiment

CentER Discussion Paper Series No. 2013-057

41 Pages Posted: 7 Nov 2013

See all articles by Mariana Blanco

Mariana Blanco

Universidad del Rosario

Patricio S. Dalton

Tilburg University - Center for Economic Research (CentER)

Juan F. Vargas

Universidad del Rosario - Faculty of Economics

Date Written: November 6, 2013

Abstract

We investigate whether and how the type of unemployment benefit institution affects productivity. We designed a field experiment to compare workers' productivity under a welfare system, where the unemployed receive an unconditional monetary transfer, with their productivity under a workfare system, where the transfer is received conditional on the unemployed spending some time on ancillary activities. First, we find that having an unemployment benefit institution, regardless of whether it makes transfers conditional or unconditional, increases workers' productivity. Second, we find that productivity is higher under Welfare than under Workfare. Becoming unemployed under Welfare comes at the psychological cost of a drop in self-esteem, presumably due to the shame or stigma associated with receiving an unconditional unemployment benefit. We document the empirical relevance of precisely this channel. The differences we observe in productivity suggest that this psychological cost acts as an extra non-monetary incentive for workers under Welfare to put a higher effort in their work.

Keywords: Unemployment Benefits, Workfare, Productivity, Self-esteem, Shame

JEL Classification: J24, J65, J45

Suggested Citation

Blanco, Mariana and Dalton, Patricio S. and Vargas, Juan F., Does the Unemployment Benefit Institution affect the Productivity of Workers? Evidence from a Field Experiment (November 6, 2013). CentER Discussion Paper Series No. 2013-057. Available at SSRN: https://ssrn.com/abstract=2350792 or http://dx.doi.org/10.2139/ssrn.2350792

Mariana Blanco (Contact Author)

Universidad del Rosario ( email )

Bogota
Colombia

HOME PAGE: http://mbnet26.googlepages.com/home

Patricio S. Dalton

Tilburg University - Center for Economic Research (CentER) ( email )

P.O. Box 90153
Tilburg, 5000 LE
Netherlands

Juan F. Vargas

Universidad del Rosario - Faculty of Economics ( email )

Casa Pedro Fermín
Calle 14 # 4-69
Bogota
Colombia

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