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HOW EFFECTIVE ARE UNEMPLOYMENT BENEFIT SANCTIONS? LOOKING BEYOND UNEMPLOYMENT EXIT

Authors

  • Patrick Arni,

    1. IZA, Bonn, Germany
    2. Faculty of Business and Economics, University of Lausanne, Switzerland
    3. CAFE, Aarhus University, Denmark
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  • Rafael Lalive,

    1. IZA, Bonn, Germany
    2. Faculty of Business and Economics, University of Lausanne, Switzerland
    3. CEPR, London, U.K.
    4. CESifo, Munich, Germany
    5. IFAU, Uppsala, Sweden
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  • Jan C. Van Ours

    Corresponding author
    1. IZA, Bonn, Germany
    2. CEPR, London, U.K.
    3. CESifo, Munich, Germany
    4. Department of Economics and CentER, Tilburg University, The Netherlands
    5. Department of Economics, University of Melbourne, Australia
    • Correspondence to: Jan van Ours, Department of Economics, Tilburg University, PO Box 90153, Tilburg, Noord Brabant, TheNetherlands. E-mail: vanours@gmail.com

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SUMMARY

This paper provides a comprehensive evaluation of the effects of benefit sanctions on post-unemployment outcomes such as post-unemployment employment stability and earnings. We use rich register data which allow us to distinguish between a warning that a benefit reduction may take place in the near future and the actual withdrawal of unemployment benefits. Adopting a multivariate mixed proportional hazard approach to address selectivity, we find that warnings do not affect subsequent employment stability but do reduce post-unemployment earnings. Actual benefit reductions lower the quality of post-unemployment jobs both in terms of job duration as well as in terms of earnings. Copyright © 2012 John Wiley & Sons, Ltd.

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