The Role of Sickness in the Evaluation of Job Search Assistance and Sanctions

56 Pages Posted: 28 Jan 2016

See all articles by Gerard J. van den Berg

Gerard J. van den Berg

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

Barbara Hofmann

University of Mannheim

Arne Uhlendorff

IZA Institute of Labor Economics

Multiple version iconThere are 3 versions of this paper

Date Written: January 2016

Abstract

Unemployment insurance agencies may combat moral hazard by punishing refusals to apply to assigned vacancies. However, the possibility to report sick creates an additional moral hazard, since during sickness spells, minimum requirements on search behavior do not apply. This reduces the ex-ante threat of sanctions. We analyze the effects of vacancy referrals and sanctions on the unemployment duration and the quality of job matches, in conjunction with the possibility to report sick. We estimate multi-spell duration models with selection on unobserved characteristics. We find that a vacancy referral increases the transition rate into work and that such accepted jobs go along with lower wages. We also find a positive effect of a vacancy referral on the probability of reporting sick. This effect is smaller at high durations, which suggests that the relative attractiveness of vacancy referrals increases over the time spent in unemployment. Overall, around 9% of sickness absence during unemployment is induced by vacancy referrals.

Keywords: Unemployment, vacancy referrals, physician, wage, unemployment insurance, monitoring, moral hazard

JEL Classification: J64, J65, C41, C21

Suggested Citation

van den Berg, Gerard J. and Hofmann, Barbara and Uhlendorff, Arne, The Role of Sickness in the Evaluation of Job Search Assistance and Sanctions (January 2016). DIW Berlin Discussion Paper No. 1542. Available at SSRN: https://ssrn.com/abstract=2723910 or http://dx.doi.org/10.2139/ssrn.2723910

Gerard J. Van den Berg

VU University Amsterdam - Department of Economics ( email )

De Boelelaan 1105
1081 HV Amsterdam
Netherlands
+31 20 444 6132 (Phone)
+32 20 444 6020 (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

Barbara Hofmann

University of Mannheim ( email )

Universitaetsbibliothek Mannheim
Zeitschriftenabteilung
Mannheim, 68131
Germany

Arne Uhlendorff (Contact Author)

IZA Institute of Labor Economics ( email )

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

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