Scandinavian Working Papers in Economics

Working Paper Series,
IFAU - Institute for Evaluation of Labour Market and Education Policy

No 2013:26: Sanctions for young welfare recipients

Gerard J. van den Berg (), Arne Uhlendorff () and Joachim Wolff ()
Additional contact information
Gerard J. van den Berg: IFAU - Institute for Evaluation of Labour Market and Education Policy, Postal: P O Box 513, SE-751 20 Uppsala, Sweden
Arne Uhlendorff: University of Mannheim, Postal: Germany
Joachim Wolff: IAB Nuremberg, Postal: Germany

Abstract: Social welfare systems usually imply specific obligations for benefit recipients. If a recipient does not comply with these obligations, a sanction involving a punitive benefits reduction may be imposed. In this paper we give an overview of the literature on the effects of sanctions in social welfare systems and we present first results on the effects of sanctions for young unemployed welfare recipients based on German administrative data. The German welfare system is particularly strict for young individuals. We distinguish between mild and strong sanctions and we focus on the impact of these sanctions on job finding probabilities. Our results suggest that each type of sanction leads to an increased transition rate to work, and that this effect is higher for strong sanctions. However, strong sanctions for young welfare recipients involve a complete withdrawal of the basic cash transfer payments.

Keywords: monitoring; welfare; youth unemployment; duration models; unemployment benefits; social assistance

JEL-codes: C41; I38; J64; J65

32 pages, December 2, 2013

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