Carrot and Stick: How Reemployment Bonuses and Benefit Sanctions Affect Exit Rates from Welfare
Bas van der Klaauw
Jan van OursJournal of Applied Econometrics 28, 275-296 (2013).
Abstract
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 reemployment bonus if they found a job that lasted at least six
months. However, they could also be punished for noncompliance with
eligibility requirements and face a sanction, \emph{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
reemployment bonuses were not.
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Last updated: May 16, 2011.