Do Incentives for Municipalities Reduce the Welfare Caseload? Evaluation of a Welfare Reform in the Netherlands

Abstract

Since 2004, most municipalities in the Netherlands receive lump sum payments from the state for the payment of social assistance allowances. As municipalities had no authority to change the eligibility rules for social assistance, the effects of the welfare reform are solely due to the efforts of municipalities to decrease the number of welfare recipients. Using variation in the timing of policy changes, this paper uses a difference-in-difference approach to assess the effectiveness of the incentive for municipalities. Based on individual panel data from administrative records, we show that the high-powered scheme led to a decline of the welfare caseload of 14% up till 2008. The reform has been most effective for those with the highest welfare dependency: single mothers and singles from non-western origin. In line with standard economic predictions, the reform does not give an incentive for cream skimming: the welfare caseload declined as well for easy to place recipients as for difficult to place recipients.

Why is impact measurement abandoned in practice? Evidence use in evaluation and contracting for five European Social Impact Bonds

“…Third, although quasi-experimental approaches can approximate RCTs, particularly for ALMPs (Card et al, 2018), they can be difficult for policy makers to interpret (Bitler et al, 2019). Furthermore, given multiple and complex goals (Heinrich and Marschke, 2010) and the difficulty of including all relevant outcomes in contracts (Kok et al, 2017), properly integrating impacts into contracts is challenging.…”

A cofinancing model for disability insurance and local government employers

“…An alternative for the central government is to provide block grants that are independent of historical expenses. Such grants reward local governments for each welfare recipient finding work with the present value of the benefits saved (Kok et al, 2017).…”

“…Indeed, several studies have found that central governments that replaced matching grants with block grants reduced the number of welfare recipients (Baicker, 2005Blank, 2007Hayashi, 2019Kok et al, 2017Moffitt, 2008.…”

“…An alternative for the central government is to provide block grants that are independent of historical expenses. Such grants reward local governments for each welfare recipient finding work with the present value of the benefits saved (Kok et al, 2017). Indeed, several studies have found that central governments that replaced matching grants with block grants reduced the number of welfare recipients (Baicker, 2005 Blank, 2007 Hayashi, 2019 Kok et al, 2017 Moffitt, 2008).…”