Why Cash Transfer Programs Can Both Stimulate and Slow Down Job Finding

Vargas Juliana Mesén () and Bruno Van der Linden
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Vargas Juliana Mesén: Institut de recherches économiques et sociales (IRES)/Louvain Institute of Data Analysis and Modeling in economics and statistics (LIDAM), Université catholique de Louvain, Louvain, Belgium

IZA Journal of Labor Economics, 2019, vol. 8, issue 1, 27

Abstract: This article analyzes the behavioral effects of cash transfer programs when jobless people need to have access to a minimum consumption level. Our model reconciles recent evidence about negligible or favorable effects of cash transfers on job-finding rates and the more standard view of negative effects. When unemployment compensation, if any, is low enough, we argue that cash transfer programs can raise the hiring probability. Our framework is flexible enough to generate the standard conclusion as well. Looking specifically at unemployment compensation, its optimal level is generally higher than when a lower bound on consumption is ignored.

Keywords: poverty; unemployment; optimal insurance (search for similar items in EconPapers)
JEL-codes: D91 H21 I32 J64 J65 (search for similar items in EconPapers)
Date: 2019
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Citations: View citations in EconPapers (2)

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Persistent link: https://EconPapers.repec.org/RePEc:vrs:izajle:v:8:y:2019:i:1:p:27:n:1

DOI: 10.2478/izajole-2019-0005

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