Disincentive effects of unemployment benefits and the role of caseworkers
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Accepted manuscript
Date
2020
DOI
Authors
Schmieder, J.F.
Trenkle, S.
Version
Accepted manuscript
OA Version
Citation
J.F. Schmieder, S. Trenkle. 2020. "Disincentive effects of unemployment benefits and the role of caseworkers." Journal of Public Economics,
Volume 182, 104096. https://doi.org/10.1016/j.jpubeco.2019.104096.
Abstract
A large literature has documented that the unemployment duration of unemployment
insurance (UI) recipient increases with the generosity of the UI system. This has been
interpreted as the disincentive effect of UI benefits, however, unemployed workers typically
also have caseworkers assigned who are monitoring and assisting the job search efforts. These
caseworkers may respond to differences in UI eligibility by shifting resources (financial or
time) between unemployed individuals in order to counteract the moral hazard effect of UI
benefits or in order to focus resources to where they have the largest effect. This suggests
that the typical estimates of the disincentive effects of UI may be biased in studies that
compare workers within the same UI agency. We estimate whether caseworkers respond
to the generosity of UI using a regression discontinuity (RD) design in Germany, where
potential UI durations vary with age. We show that across a wide variety of measures, such
as meetings, sanctions, and training programs UI caseworkers do not treat unemployed with
different eligibility differently. At best we find a very small effect that workers with shorter
eligibility close to the exhaustion point are more likely to be assigned to training programs
that prolong their UI eligibility. The typical RD estimates of the UI disincentive effects thus
seem to be valid estimates.
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License
The accepted manuscript version of this work is made available under a Creative Commons Attribution-NonCommercial-NoDerivatives 4.0 International license.