Job market paper

Threat Effects of Monitoring and Unemployment Insurance Sanctions: Evidence from Two Reforms

The paper provides the first quasi-experimental estimates of the threat of unemployment insurance (UI) benefit sanctions on job-exit rates. Using a difference-in-differences design, I exploit two reforms of the Swedish UI system that made monitoring and sanctions considerably stricter at different points in time for (i) UI claimants and (ii) job-seekers who exhausted their UI benefits and therefore receive alternative “activity support” benefits instead. Results show that men (in particular if long-term unemployed) respond to monitoring and the threat of sanctions by finding jobs faster. I find no significant responses for women. In contrast to this analysis, the existing literature has almost exclusively focused on estimating how job-finding rates respond for those actually receiving a sanction. I estimate such “sanction-imposition effects” and find that they are similar in size for men and women. I further show that properly aggregated sanction-imposition effects explain very little of the overall reform effects for males, and that they are sufficiently small to be consistent with the small and insignificant reform effects found for women. The fact that most of the effects of the reforms arise through the threat component and not through the sanction-imposition effects implies that the total impact of monitoring and sanctions may be severely underestimated when focusing solely on the effects on those actually receiving sanctions.