Treatment Versus Regime Effects of Carrots and Sticks

Patrick P Arni, Gerard J. van den Berg, Rafael Lalive*

*Corresponding author for this work

Research output: Contribution to journalArticle (Academic Journal)peer-review

Abstract

Public employment service (PES) agencies and caseworkers (CWs) often have substantial leeway in the design and implementation of active labor market policies for the unemployed, and they use policies to a varying extent. We estimate regime effects which capture how CW and PES affect outcomes through different policy intensities. These operate potentially on all forward-looking job seekers regardless of actual treatment exposure. We consider regime effects for two sets of programs, supporting (“carrots”) and restricting (“sticks”) programs, and contrast regime and treatment effects on unemployment durations, employment, and post-unemployment earnings using register data that contain PES and caseworker identifiers for about 130,000 job spells. Regime effects are important: earnings are higher in a PES if carrot-type programs are used more intensively and stick-type programs are used less intensively. Actual treatment effects on earnings have a similar order of magnitude as regime effects and are positive for participation in carrot-type programs and negative for stick-type treatments. Regime effects are economically substantial. A modest increase in the intended usage of carrots and sticks reduces the total cost of an unemployed individual by up to 7.5%.
Original languageEnglish
Pages (from-to)1-17
Number of pages17
JournalJournal of business & economic statistics
Volume(2020)
Issue number0
Early online date3 Aug 2020
DOIs
Publication statusE-pub ahead of print - 3 Aug 2020

Structured keywords

  • ECON CEPS Welfare
  • ECON Applied Economics

Keywords

  • Active labour market programs
  • Caseworkers
  • Earnings
  • Employment
  • Policy Regime
  • Unemployment

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