The design of 'soft' welfare-to-work programs

Nicola Pavoni, Ofer Setty, Giovanni L. Violante

    Research output: Contribution to journalArticle

    Abstract

    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.

    Original languageEnglish (US)
    Pages (from-to)160-180
    Number of pages21
    JournalReview of Economic Dynamics
    Volume20
    DOIs
    StatePublished - Apr 1 2016

    Keywords

    • Human capital
    • Job-search assistance
    • Social assistance
    • Unemployment insurance
    • Welfare-to-work
    • Work requirements

    ASJC Scopus subject areas

    • Economics and Econometrics

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