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The tougher, the better? How the interplay of search requirements and sanction threats affects compliance behavior and job finding Patrick Arni (IZA Bonn) Amelie Schiprowski (IZA Bonn and DIW Berlin) 1. MOTIVATION Enforcement of job search requirements increasingly employed to counteract moral hazard problems in Unemployment Insurance (UI) schemes Not a 0-1 treatment, but a combination of requirement and enforcement parameters – Their design varies largely across OECD countries (c.f. Venn (2012)) The understanding of the interplay of these parameters is crucial to determine how a job seeker is affected by the job search moni- toring regime Our aim & contributions: Provide empirical evidence on the joint determination of job search behavior through requirement thresh- olds and enforcement threats Unique register data: Monthly information on job search requirements, effort, (non-)compliance, warnings and enforced sanctions Intensive margin approach ´ We analyze the policy parameters of an implemented search monitoring regime 5. PRELIMINARY RESULTS -.06 -.04 -.02 0 .02 .04 Change in Probability of Non-Compliance low medium low medium high high Requirement Policy Effect of a 30% increase in p0 by requirement policy Effect of requirement policy 95% CI Effect on Probability of Non-Compliance -.1 -.05 0 .05 .1 .15 Change in Hazard Rate low medium low medium high high Requirement policy Effect of requirement policy Effect of a 30% increase in p0 by requirement policy 95% CI Effects on Job Finding Hazard 3. IDENTIFYING REQUIREMENT AND ENFORCEMENT POLICIES 3a. Requirement s r Identification challenges: Exclude (i) contact-related endogeneity and (ii) correlation with Public Employment Service (PES) enforcement policy from variation in requirement levels ´ Solution: exploit that different profession-groups are differently affected by PES-requirement policy – Background: some PES implement a profession-specific, others a “one-fit-all” requirement threshold ´ Estimate s r = α + x’β + πPES+ ηprofession + νPES,profession + ε And retain ^ ν PES,profession as an indicator for the profession-PES specific requirement policy (In final outcome equation, distribu- tion of ^ ν PES,profession enters in categories D ^ s r ). 0 .02 .04 .06 .08 Fraction -2 -1 0 1 2 Requirement Policy Indicator 3b. Enforcement probability p 0 Identification challenge: Obtain policy-driven change in enforcement threat that does not capture changes in compliance behaviors ´ Solution: Quasi-experimental variation resulting from reform of UI law in April 2011: – Strengthened deadline for submission of job applications list – Moved some PES from “second deadline policy” to “no excuse policy” Reform induced harmonization of enforcement practices across PES ´ Treatment intensity varies according to PES-level pre-enforcement strictness ´ D-i-D setting with continuous treatment intensity: – Measure treatment intensity as p(sanction|detection) registered by each PES during the 6 pre-reform months ´p(s|d) pre – Average p(s|d) post: 0.75 ´ How far is a PES' p(s|d) pre? – Treatment intensity: inten = .75-p(s|d) pre ; inten = 0 if p(s|d) pre > 0.75 – Good predictor of observed increase in enforcement probability: .4 .6 .8 1 p(sanction|detection) 2010m1 2010m7 2011m1 2011m7 2012m1 2012m7 month of detection Treatment Intensity > 0 Treatment Intensity = 0 -.2 -.1 0 .1 .2 .3 .4 .5 0 .1 .2 .3 .4 .5 inten Delta p_0 Fitted values 6. PRELIMINARY CONCLUSIONS Empirics confirm theory: Requirement and enforcement parameters jointly determine the job seeker’s compliance trade-off: – Non-compliance increases with requirement regime – Non-compliance is reduced by an increase in the sanction threat under a high-requirement regime Design of requirement and enforcement policies matters for the job seeker’s job finding probability: – High requirement can have negative impact on search success (quality-quantity tradeoff?) – Job finding increases with sanction threat under high-requirement regime 2. GRAPHICAL ILLUSTRATION OF THEORETICAL PREDICTIONS Policy changes of interest: Increase in Requirement Threshold (Δ s r > 0) and Increase in Sanction Probability (Δ p 0 > 0) Predictions result from Abbring/van den Berg/van Ours (EJ, 2005) Main predictions for Empirical Analysis: ´ Relevance of sanction threat p0 increases with requirement s r ´ Non-compliance behavior is a suitable outcome to indicate relevance of requirement policy from the job seeker’s perspective ´ Impacts on job finding ambiguous s1: no of applications realized s1*: no of applications realized in absence of requirement re- gime ρR1: value of unemployment (=reservation wage) ρR1*: value of unemployment (=reservation wage) in absence of requirement regime ρR1nc: value of unemployment (=reservation wage) under non-compliance with re- quirement 4. FINAL OUTCOME EQUATION 1. Estimate joint effects of s r and p 0 on non-compliance probability p(nc) = x' β + δ^ s r D ^ s r + ρ^ s r × inten Δp o + φ^ s r × post + π^ s r,PES + μ season + γyear + u 2. Estimate joint effects of s r and p 0 on duration to job finding (controlling for realized sanction events) ln θ e = ln λ(t e) + x' β + δ^ s r D ^ s r + ρ^ s r × inten Δp 0 + φ^ s r × post + π^ s r,PES + πPES + μ season + γyear
Transcript of 0%#)1234 $ &5$6#3)7$)#8'/)#9#0%6$30:$6307%/& · !"#$%&'("#)*$%"#$+#%%#),$-&.$%"#$/0%#)1234 $...
The tougher, the better? How the interplay of search requirements and sanction threats affects compliance behavior and job findingPatrick Arni (IZA Bonn)Amelie Schiprowski (IZA Bonn and DIW Berlin)
1. MOTIVATION
� Enforcement of job search requirements increasingly employed to counteract moral hazard problems in Unemployment Insurance (UI) schemes
� Not a 0-1 treatment, but a combination of requirement and enforcement parameters
– Their design varies largely across OECD countries (c.f. Venn (2012))
� The understanding of the interplay of these parameters is crucial to determine how a job seeker is affected by the job search moni-toring regime
Our aim & contributions: Provide empirical evidence on the joint determination of job search behavior through requirement thresh-
olds and enforcement threats
� Unique register data: Monthly information on job search requirements, effort, (non-)compliance, warnings and enforced sanctions
� Intensive margin approach ´ We analyze the policy parameters of an implemented search monitoring regime
5. PRELIMINARY RESULTS
-.06
-.04
-.02
0.0
2.0
4C
hang
e in
Pro
babi
lity
of N
on-C
ompl
ianc
e
low medium low medium high highRequirement Policy
Effect of a 30% increase in p0 by requirement policyEffect of requirement policy
95% CI
Effect on Probability of Non-Compliance
-.1-.0
50
.05
.1.1
5C
hang
e in
Haz
ard
Rat
e
low medium low medium high highRequirement policy
Effect of requirement policyEffect of a 30% increase in p0 by requirement policy95% CI
Effects on Job Finding Hazard
3. IDENTIFYING REQUIREMENT AND ENFORCEMENT POLICIES
3a. Requirement s r Identification challenges: Exclude (i) contact-related endogeneity and (ii) correlation with Public Employment Service (PES) enforcement policy from
variation in requirement levels
´ Solution: exploit that different profession-groups are differently affected by PES-requirement policy
– Background: some PES implement a profession-specific, others a “one-fit-all” requirement threshold
´ Estimate s r = ! + x’" + # PES + $ profession + % PES,profession + &And retain ̂ % PES,profession as an indicator for the profession-PES specific requirement policy (In final outcome equation, distribu-tion of ̂ % PES,profession enters in categories D ̂ s r ).
0.0
2.0
4.0
6.0
8Fr
actio
n
-2 -1 0 1 2Requirement Policy Indicator
3b. Enforcement probability p 0 Identification challenge: Obtain policy-driven change in enforcement threat that does not capture changes in compliance behaviors
´ Solution: Quasi-experimental variation resulting from reform of UI law in April 2011:
– Strengthened deadline for submission of job applications list
– Moved some PES from “second deadline policy” to “no excuse policy”
Reform induced harmonization of enforcement practices across PES ´ Treatment intensity varies according to PES-level pre-enforcement strictness
´ D-i-D setting with continuous treatment intensity:
– Measure treatment intensity as p(sanction|detection) registered by each PES during the 6 pre-reform months ́ p(s|d) pre – Average p(s|d) post : 0.75 ´ How far is a PES' p(s|d) pre ? – Treatment intensity: inten = .75-p(s|d) pre ; inten = 0 if p(s|d) pre > 0.75 – Good predictor of observed increase in enforcement probability:
.4.6
.81
p(sa
nctio
n|de
tect
ion)
2010m1 2010m7 2011m1 2011m7 2012m1 2012m7month of detection
Treatment Intensity > 0 Treatment Intensity = 0
-.2-.1
0.1
.2.3
.4.5
0 .1 .2 .3 .4 .5inten
Delta p_0 Fitted values
6. PRELIMINARY CONCLUSIONS
� Empirics confirm theory: Requirement and enforcement parameters jointly determine the job seeker’s compliance trade-off:
– Non-compliance increases with requirement regime
– Non-compliance is reduced by an increase in the sanction threat under a high-requirement regime
� Design of requirement and enforcement policies matters for the job seeker’s job finding probability:
– High requirement can have negative impact on search success (quality-quantity tradeoff?)
– Job finding increases with sanction threat under high-requirement regime
2. GRAPHICAL ILLUSTRATION OF THEORETICAL PREDICTIONS
Policy changes of interest: Increase in Requirement Threshold (' s r > 0) and Increase in Sanction Probability (' p 0 > 0)Predictions result from Abbring/van den Berg/van Ours (EJ, 2005)
Main predictions for Empirical Analysis:
´ Relevance of sanction threat p0 increases with requirement s r ´ Non-compliance behavior is a suitable outcome to indicate relevance of requirement policy
from the job seeker’s perspective
´ Impacts on job finding ambiguous
s 1 : no of applications realized
s 1 *: no of applications realized in absence of requirement re-gime
(R1: value of unemployment (=reservation wage)
(R1*: value of unemployment (=reservation wage) in absence of requirement regime
(R1 nc : value of unemployment (=reservation wage) under non-compliance with re-quirement
4. FINAL OUTCOME EQUATION
1. Estimate joint effects of s r and p 0 on non-compliance probability
p(nc) = x'" + ) ̂ s r D ̂ s r + ( ̂ s r * inten ' p o + + ̂ s r * post + # ̂ s r ,PES + µ season + , year + u
2. Estimate joint effects of s r and p 0 on duration to job finding (controlling for realized sanction events)
ln - e = ln .( t e ) + x'" + ) ̂ s r D ̂ s r + ( ̂ s r * inten ' p 0 + + ̂ s r * post + # ̂ s r ,PES + # PES + µ season + , year
