Is the Threat of Reemployment Services More Effective Than the Services Themselves? Evidence from Random Assignment in the UI System

Abstract

We examine the effect of the Worker Profiling and Reemployment Services system. This program "profiles" Unemployment Insurance (UI) claimants to determine their probability of benefit exhaustion and then provides mandatory employment and training services to claimants with high predicted probabilities. Using a unique experimental design, we estimate that the program reduces mean weeks of UI benefit receipt by about 2.2 weeks, reduces mean UI benefits received by about $143, and increases subsequent earnings by over $1,050. Most of the effect results from a sharp increase in early UI exits in the treatment group relative to the control group. (JEL J650)

Incentives and the Sorting of Altruistic Agents into Street-Level Bureaucracies

“…Many countries use such a procedure (see OECD, 2007, Black et al, 2003, Rosholm et al, 2004. One reason to introduce profiling is to avoid casemanagers' bias.…”

“…Hence, investigating a client does not involve cost of effort and, when the agent allocates a service or sanction, he is always fully informed about the client's willingness and ability to work. 6 Agent's utility U a depends first of all on his base salary w (see table 1). Second, the agent may be altruistic towards the client he meets.…”

“…Lastly, the clients', principal's and agents' payoffs are realized. 6 We thus abstract from the issue of how much effort an agent exerts to determine the correct allocation which is central in Prendergast (2007). 7 We also discuss along the way what would happen when some agents have negative, hostile feelings towards their clients (θ j < 0), as in Prendergast (2007).…”

Training and search during unemployment

“…Hence, the impact of training e¤ectiveness on the expected unemployment duration is ambiguous. Some empirical evidence (Black et al 2003) suggest that the anticipation of the participation to training programs decreases the unemployment duration in practice. However, training plays no deterring role here.…”

“…Since human capital depreciates, it may reach a level at which the returns to providing costly incentives for search are too low and unemployment consumption becomes constant. 5 This paper is closest to Pavoni and Violante (2007) the optimal sequencing of di¤erent unemployment policies and the consequences for the optimal consumption path. Their paper introduces social assistance and job monitoring as alternative policies to the standard unemployment policy which induces search through a wedge between employment and unemployment consumption.…”