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Why Cash Transfer Programs Can Both Stimulate and Slow Down Job Finding

Authors
  • Vargas, Juliana Mesén1
  • Linden, Bruno Van der2
  • 1 Institut de recherches économiques et sociales (IRES)/Louvain Institute of Data Analysis and Modeling in economics and statistics (LIDAM), Université catholique de Louvain, Belgium , (Belgium)
  • 2 Fonds national de la recherche scientifique (FNRS) and Institut de recherches économiques et sociales (IRES)/Louvain Institute of Data Analysis and Modeling in economics and statistics (LIDAM), Université catholique de Louvain, Belgium , (Belgium)
Type
Published Article
Journal
IZA Journal of Labor Economics
Publisher
Sciendo
Publication Date
Nov 27, 2019
Volume
8
Issue
1
Identifiers
DOI: 10.2478/izajole-2019-0005
Source
De Gruyter
Keywords
License
Green

Abstract

This article analyzes the behavioral effects of cash transfer programs when jobless people need to have access to a minimum consumption level. Our model reconciles recent evidence about negligible or favorable effects of cash transfers on job-finding rates and the more standard view of negative effects. When unemployment compensation, if any, is low enough, we argue that cash transfer programs can raise the hiring probability. Our framework is flexible enough to generate the standard conclusion as well. Looking specifically at unemployment compensation, its optimal level is generally higher than when a lower bound on consumption is ignored.

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