Does the Unemployement Benefit Institution Affect the Productivity of Workers? Evidence from a Field Experiment

M. Blanco, P.S. Dalton, J.F. Vargas

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Abstract

Abstract: We investigate whether and how the type of unemployment bene t institution affects productivity. We designed a field experiment to compare workers' productivity under a welfare system, where the unemployed receive an unconditional monetary transfer, with their productivity under a workfare system, where the transfer is received conditional on the unemployed spending some time on ancillary activities. First, we fi nd that having an unemployment bene fit institution, regardless of whether it makes transfers conditional or unconditional, increases workers' productivity. Second, we find that productivity is higher under Welfare than under Workfare. Becoming unemployed under Welfare comes at the psychological cost of a drop in self-esteem, presumably due to the shame or stigma associated with receiving an unconditional unemployment benefi t. We document the empirical relevance of precisely this channel. The differences we observe in productivity suggest that this psychological cost acts as an extra non- monetary incentive for workers under Welfare to put a higher effort in their work.
Original languageEnglish
Place of PublicationTilburg
PublisherEconomics
Number of pages41
Volume2013-057
Publication statusPublished - 2013

Publication series

NameCentER Discussion Paper
Volume2013-057

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Keywords

  • Unemployment Benefi ts
  • Workfare
  • Productivity
  • Self-esteem
  • Shame

Cite this

Blanco, M., Dalton, P. S., & Vargas, J. F. (2013). Does the Unemployement Benefit Institution Affect the Productivity of Workers? Evidence from a Field Experiment. (CentER Discussion Paper; Vol. 2013-057). Tilburg: Economics.