DP2361 Modelling Financial Incentives To Get Unemployed Back To Work
|Author(s):||Jan Boone, Jan C. van Ours|
|Publication Date:||January 2000|
|Keyword(s):||Financial Incentives, Sanctions, Unemployment Benefits|
|JEL(s):||H55, J65, J68|
|Programme Areas:||Labour Economics|
|Link to this Page:||www.cepr.org/active/publications/discussion_papers/dp.php?dpno=2361|
We model how unemployment benefit sanctions - benefit reductions that are imposed if unemployed do not comply with job search guidelines - affect unemployment. In our analysis we find that not only micro-effects concerning the behaviour of individual unemployed workers are relevant, but also macro-spillover effects from the additional creation of vacancies, which originates from the increased effectiveness of labour supply. We advocate that for a given loss in welfare for the unemployed benefit sanctions are more effective in reducing unemployment than an across the board reduction in the replacement rate.