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Transparency of the Welfare System and Labor Market Outcomes of Unemployed Workers

Sofie Cairo () and Robert Mahlstedt ()
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Sofie Cairo: Harvard Business School
Robert Mahlstedt: University of Copenhagen

No 14940, IZA Discussion Papers from Institute of Labor Economics (IZA)

Abstract: We study how the transparency of welfare systems affects labor market outcomes of unemployed workers in a large-scale field experiment. Our low-cost information intervention uses a personalized online tool that informs benefit recipients about their personal risk of a benefit reduction when not complying with a work requirement. We find disparate effects reflecting individuals' job search status. Providing personalized information improves labor market outcomes by mitigating the pressure to accept unstable part-time jobs among active job seekers with a low sanction risk. Inactive persons with a high sanction risk leave welfare and rely on alternative income support more frequently.

Keywords: unemployment; transfer programs; transparency; sanctions; uncertainty; work requirements; field experiments; information treatment (search for similar items in EconPapers)
JEL-codes: C93 D83 J68 (search for similar items in EconPapers)
Pages: 45 pages
Date: 2021-12
New Economics Papers: this item is included in nep-exp and nep-lab
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