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CARROT AND STICK: HOW RE‐EMPLOYMENT BONUSES AND BENEFIT SANCTIONS AFFECT EXIT RATES FROM WELFARE
Author(s) -
Van der Klaauw Bas,
Van Ours Jan C.
Publication year - 2013
Publication title -
journal of applied econometrics
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 2.878
H-Index - 99
eISSN - 1099-1255
pISSN - 0883-7252
DOI - 10.1002/jae.1265
Subject(s) - sanctions , welfare , incentive , spell , affect (linguistics) , economics , labour economics , demographic economics , public economics , business , market economy , law , political science , psychology , sociology , anthropology , communication
SUMMARY To increase the exit from welfare, benefit recipients in the municipality of Rotterdam were exposed to various financial incentives. Once their benefit spell exceeded one year, welfare recipients were entitled to a re‐employment bonus if they found a job that lasted at least 6 months. However, they could also be punished for noncompliance with eligibility requirements and face a sanction, i.e. a temporary reduction of their benefits. We find that the financial sticks in the form of benefit sanctions were effective in stimulating the exit from welfare, while the financial carrots in the form of re‐employment bonuses were not. Copyright © 2011 John Wiley & Sons, Ltd.