Treatment Versus Regime Effects of Carrots and Sticks

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

*Corresponding author for this work

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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)111-127
Number of pages17
JournalJournal of Business and Economic Statistics
Volume40
Issue number1
Early online date25 Jun 2020
DOIs
Publication statusPublished - 3 Aug 2022

Funding

Rafael Lalive acknowledges the support by the National Center for Competence in Research LIVES.

FundersFunder number
Caisse Centrale de Compensation
National Center for Competence in Research LIVES
Swiss Secretariat for Economic Affairs
Center for Agriculture, Food and the Environment, University of Massachusetts Amherst
Centre for Economic Policy Research
Rijksuniversiteit Groningen
Université de Lausanne
Institutet för arbetsmarknads- och utbildningspolitisk politisk utvärdering

    Keywords

    • Active labor market programs
    • Caseworkers
    • Earnings
    • Employment
    • Policy regime
    • Unemployment

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