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Is it socially efficient to impose job search requirements on unemployed benefit claimants with hyperbolic preferences?

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  • Cockx, Bart
  • Ghirelli, Corinna
  • Van der Linden, Bruno
Abstract
DellaVigna and Paserman (2005) and Paserman (2008) have shown that imposing job search requirements on sophisticated unemployed benefit claimants with hyperbolic time preferences is Pareto improving in that it raises welfare for the unemployed, by limiting harmful procrastination, and for employees, since the enhanced search boosts the job finding rate, thereby reducing the contributions required for the funding of benefits. This paper demonstrates that the range of Pareto improvements is much reduced if the analysis takes into account the fact that benefit claimants may not comply with the requirements, especially if the monitoring technology displays imperfections induced by caseworker discretion or measurement error.

Suggested Citation

  • Cockx, Bart & Ghirelli, Corinna & Van der Linden, Bruno, 2014. "Is it socially efficient to impose job search requirements on unemployed benefit claimants with hyperbolic preferences?," Journal of Public Economics, Elsevier, vol. 113(C), pages 80-95.
    • Handle: RePEc:eee:pubeco:v:113:y:2014:i:c:p:80-95
    DOI: 10.1016/j.jpubeco.2014.03.006
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    2. Pedro S. Martins & Sofia Pessoa e Costa, 2014. "Reemployment effects from increased activation: Evidence from times of crisis," Working Papers 52, Queen Mary, University of London, School of Business and Management, Centre for Globalisation Research.
    3. Hernæs, Øystein & Markussen, Simen & Røed, Knut, 2017. "Can welfare conditionality combat high school dropout?," Labour Economics, Elsevier, vol. 48(C), pages 144-156.
    4. Hupkau, Claudia & Maniquet, François, 2018. "Identity, non-take-up and welfare conditionality," Journal of Economic Behavior & Organization, Elsevier, vol. 147(C), pages 13-27.
    5. Markussen, Simen & Røed, Knut & Schreiner, Ragnhild Camilla, 2015. "Can Compulsory Dialogues Nudge Sick-Listed Workers Back to Work?," IZA Discussion Papers 9090, Institute of Labor Economics (IZA).
    6. Bart Cockx & Muriel Dejemeppe & Andrey Launov & Bruno Van der Linden, 2018. "Imperfect Monitoring of Job Search: Structural Estimation and Policy Design," Journal of Labor Economics, University of Chicago Press, vol. 36(1), pages 75-120.
    7. Dohmen, Thomas, 2014. "Behavioral labor economics: Advances and future directions," Labour Economics, Elsevier, vol. 30(C), pages 71-85.
    8. Pedro S. Martins & Sofia Pessoa e Costa, 2014. "Reemployment and substitution effects from increased activation: evidence from times of crisis," Nova SBE Working Paper Series wp590, Universidade Nova de Lisboa, Nova School of Business and Economics.
    9. Peter Mueser & Marios Michaelides, 2015. "Are Reemployment Services Effective? Experimental Evidence from the Great Recession (WP 15-09 is now WP 18-04)," Working Papers 1509, Department of Economics, University of Missouri, revised Feb 2018.
    10. Thomas Huizen & Janneke Plantenga, 2014. "Job Search Behaviour and Time Preferences: Testing Exponential Versus Hyperbolic Discounting," De Economist, Springer, vol. 162(3), pages 223-245, September.
    11. Morescalchi Andrea & Paruolo Paolo, 2020. "Too Much Stick for the Carrot? Job Search Requirements and Search Behaviour of Unemployment Benefit Claimants," The B.E. Journal of Economic Analysis & Policy, De Gruyter, vol. 20(1), pages 1-21, January.

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    More about this item

    Keywords

    Job search model; Job search monitoring; Non-compliance; Measurement error; Hyperbolic discounting; Social efficiency;
    All these keywords.

    JEL classification:

    • D60 - Microeconomics - - Welfare Economics - - - General
    • D90 - Microeconomics - - Micro-Based Behavioral Economics - - - General
    • J64 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Unemployment: Models, Duration, Incidence, and Job Search
    • J65 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Unemployment Insurance; Severance Pay; Plant Closings
    • J68 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Public Policy

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