Structural empirical evaluation of job search monitoring

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Working paper


To evaluate search effort monitoring of unemployed workers, it is important to take account of post-unemployment wages and job-to-job mobility. We structurally estimate a job search model with endogenous job search effort by the unemployed along various search channels that deals with this. The data are from an experiment in the Netherlands in which the extent of monitoring is randomized. They include registers of post-unemployment outcomes like wages and job mobility, and survey data on measures of search behavior. As such we are the first to study monitoring effects on post-unemployment outcomes. Once employed, individuals have the opportunity to further improve their position by moving to better-paid jobs, and we find that this reduces the extent to which monitoring induces substitution towards formal search channels in unemployment. In general, job mobility compensates for adverse long-run effects of monitoring on wages. We use the structural estimates to compare monitoring to counterfactual policies against moral hazard, like re-employment bonuses and changes in the unemployment benefits path. Replacing monitoring by an over-all benefits reduction in a way that is neutral to the worker results in slightly smaller effects with lower administrative costs.