Punitive sanctions and the transition rate from welfare to work

In The Netherlands, the average exit rate out of welfare is dramatically low. Most welfare recipients have to comply with guidelines on job searcheffort that are imposed by the welfare agency. If they do not, then a sanction in the form of a temporarily benefit reduction can be imposed. This paper investigates the effect of such sanctions on the transition fromwelfare to work using a unique set of rich administrative data on welfare recipients in The Netherlands. We find that the imposition of sanctionssubstantially increases the individual transition rate from welfare to work. We also describe the other determinants of the transition from welfare towork.