Discussion Paper Details

Please find the details for DP11039 in an easy to copy and paste format below:

Full Details   |   Bibliographic Reference

Full Details

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

Author(s): Barbara Hofmann, Arne Uhlendorff and Gerard van den Berg

Publication Date: January 2016

Keyword(s): monitoring, moral hazard, physician, unemployment, unemployment insurance, vacancy referrals and wage

Programme Area(s): Labour Economics

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 vacancy referrals increase the transition to work and that these jobs go along with a lower wage. However, we also find a positive effect of receiving a vacancy referral on the probability of reporting sick. This effect is smaller at high durations, which suggests that the value of a vacancy referral increases over the time spent in unemployment. Overall, around 9% of sickness absence during unemployment is induced by vacancy referrals.

For full details and related downloads, please visit:

Bibliographic Reference

Hofmann, B, Uhlendorff, A and van den Berg, G. 2016. 'The Role of Sickness in the Evaluation of Job Search Assistance and Sanctions'. London, Centre for Economic Policy Research.