Working Paper: CEPR ID: DP11039
Authors: Gerard J. van den Berg; Barbara Hofmann; Arne Uhlendorff
Abstract: Unemployment insurance agencies may combat moral hazard by punishing refusals to apply to assigned vacancies. However, the possibility to report sick creates an additional moral hazard, since during sickness spells, minimum requirements on search behavior do not apply. This reduces the ex ante threat of sanctions. We analyze the effects of vacancy referrals and sanctions on the unemployment duration and the quality of job matches, in conjunction with the possibility to report sick. We estimate multi-spell duration models with selection on unobserved characteristics. We find that vacancy referrals increase the transition to work and that these jobs go along with a lower wage. However, we also find a positive effect of receiving a vacancy referral on the probability of reporting sick. This effect is smaller at high durations, which suggests that the value of a vacancy referral increases over the time spent in unemployment. Overall, around 9% of sickness absence during unemployment is induced by vacancy referrals.
Keywords: Monitoring; Moral Hazard; Physician; Unemployment; Unemployment Insurance; Vacancy Referrals; Wage
JEL Codes: C21; C41; J64; J65
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Receiving a vacancy referral (J63) | Transitioning from unemployment to work (J68) |
| Receiving a vacancy referral (J63) | Job match quality (L15) |
| Receiving a vacancy referral (J63) | Reporting sickness (I12) |
| Reporting sickness (I12) | Avoiding less attractive job offers (J63) |
| Receiving a vacancy referral (J63) | Probability of being sanctioned (Z28) |
| Sanctions (F51) | Job match quality (L15) |
| Local unemployment rate (J64) | Probability of receiving a vacancy referral (J68) |
| Local unemployment rate (J64) | Probability of finding a job (J68) |
| Local unemployment rate (J64) | Likelihood of reporting sick (J22) |