With Gerard van den Berg and Jan van Ours, I have measured the importance of moral hazard in unemployment insurance. We exploit that punitive benefits reductions (sanctions) induce individual-specific variation in incentives to find employment over time.
Sanctions or punitive benefits reductions are increasingly used as a tool to enforce compliance of unemployment insurance claimants with search requirements. This article analyses sanctions using a unique administrative data set of individuals who started collecting unemployment insurance in the Netherlands in 1992. After correction for selectivity in the imposition of sanctions, we find that sanctions substantially raise individual re-employment rates.