Treatment Versus Regime Effects of Carrots and Sticks

Patrick Arni; Gerard J. van den Berg; Rafael Lalive

doi:10.1080/07350015.2020.1784744

Treatment Versus Regime Effects of Carrots and Sticks

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

^*Corresponding author for this work

Economics

Research output: Contribution to Journal › Article › Academic › peer-review

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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 language	English
Pages (from-to)	111-127
Number of pages	17
Journal	Journal of Business and Economic Statistics
Volume	40
Issue number	1
Early online date	25 Jun 2020
DOIs	https://doi.org/10.1080/07350015.2020.1784744
Publication status	Published - 3 Aug 2022

Funding

We are grateful to the editor Rajeev Dehejia, an anonymous associate editor, two anonymous referees, Olof Åslund, Gregory Jolivet, Pedro Martins, Knut Røed, Jan van Ours, Ingrid Waernbaum, and several seminar audiences for their comments. We thank Michael Lechner and the Swiss Secretariat for Economic Affairs, especially Jonathan Gast, and the Caisse Centrale de Compensation, especially David Sanchez, for their help with data and for useful comments. Jeremy Zuchuat provided excellent research assistance for the revised version. Patrick Arni, [email protected], is also affiliated to IZA, CESifo, CAFE, and DE (University of Lausanne). Gerard van den Berg, [email protected], is also affiliated to the University of Groningen, IFAU, IZA, ZEW, CESifo, and CEPR. Rafael Lalive, [email protected], is also affiliated to CESifo, CEPR, IFAU, and IZA. Rafael Lalive acknowledges the support by the National Center for Competence in Research LIVES. Rafael Lalive acknowledges the support by the National Center for Competence in Research LIVES.

Funders
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

UN SDGs

This output contributes to the following UN Sustainable Development Goals (SDGs)

SDG 8 Decent Work and Economic Growth

Keywords

Active labor market programs
Caseworkers
Earnings
Employment
Policy regime
Unemployment

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10.1080/07350015.2020.1784744

Treatment Versus Regime Effects of Carrots and SticksFinal published version, 2.56 MBLicence: Article 25fa Dutch Copyright Act

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title = "Treatment Versus Regime Effects of Carrots and Sticks",

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\%.",

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Treatment Versus Regime Effects of Carrots and Sticks

Abstract

Funding

UN SDGs

Keywords

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