TY - JOUR
T1 - The design of 'soft' welfare-to-work programs
AU - Pavoni, Nicola
AU - Setty, Ofer
AU - Violante, Giovanni L.
N1 - Publisher Copyright:
© 2015 Elsevier Inc.
PY - 2016/4/1
Y1 - 2016/4/1
N2 - This paper models welfare-to-work programs as contracts offered by the principal/government to unemployed agents in an environment with moral hazard. A welfare-to-work program comprises of several policy instruments (e.g., job-search, assisted search, mandated work) the principal can use, in combination with welfare benefits, in order to minimize the costs of delivering promised utility to the agent. The generosity of the program and the skill level of the unemployed agent determine the optimal policy instrument to be implemented. Restricting attention to 'soft programs' - contracts that make no use of punishments or sanctions - allows a fully analytical characterization of the optimal program and, in addition, it makes the solution robust to hidden saving.
AB - This paper models welfare-to-work programs as contracts offered by the principal/government to unemployed agents in an environment with moral hazard. A welfare-to-work program comprises of several policy instruments (e.g., job-search, assisted search, mandated work) the principal can use, in combination with welfare benefits, in order to minimize the costs of delivering promised utility to the agent. The generosity of the program and the skill level of the unemployed agent determine the optimal policy instrument to be implemented. Restricting attention to 'soft programs' - contracts that make no use of punishments or sanctions - allows a fully analytical characterization of the optimal program and, in addition, it makes the solution robust to hidden saving.
KW - Human capital
KW - Job-search assistance
KW - Social assistance
KW - Unemployment insurance
KW - Welfare-to-work
KW - Work requirements
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U2 - 10.1016/j.red.2015.01.001
DO - 10.1016/j.red.2015.01.001
M3 - Article
AN - SCOPUS:84960093956
SN - 1094-2025
VL - 20
SP - 160
EP - 180
JO - Review of Economic Dynamics
JF - Review of Economic Dynamics
ER -