CARROT AND STICK: HOW RE-EMPLOYMENT BONUSES AND BENEFIT SANCTIONS AFFECT EXIT RATES FROM WELFARE
Article first published online: 5 OCT 2011
Copyright © 2011 John Wiley & Sons, Ltd.
Journal of Applied Econometrics
Volume 28, Issue 2, pages 275–296, March 2013
How to Cite
Van der Klaauw, B. and Van Ours, J. C. (2013), CARROT AND STICK: HOW RE-EMPLOYMENT BONUSES AND BENEFIT SANCTIONS AFFECT EXIT RATES FROM WELFARE. J. Appl. Econ., 28: 275–296. doi: 10.1002/jae.1265
- Issue published online: 18 FEB 2013
- Article first published online: 5 OCT 2011
- Manuscript Revised: 14 MAY 2011
- Manuscript Received: 7 JUL 2010
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.