Modeling financial incentives to get the unemployed back to work
Jan Boone, Jan C van Ours
JOURNAL OF INSTITUTIONAL AND THEORETICAL ECONOMICS-ZEITSCHRIFT FUR DIE GESAMTE STAATSWISSENSCHAFT | J C B MOHR | Published : 2006
We model how unemployment benefit sanctions - benefit reductions that are imposed if unemployed do not comply with job search guidelines - affect unemployment. We find that benefit sanctions are more effective in reducing unemployment than an across-the-board reduction in the replacement rate, for a given loss in welfare for the unemployed. We decompose the effects of a sanction system into micro, crowding-out, spillover, and tax effects. © 2006 Mohr Siebeck.