THE WELFARE EFFECTS OF MANDATORY REEMPLOYMENT PROGRAMS: COMBINING A STRUCTURAL MODEL AND EXPERIMENTAL DATA

Abstract

This article estimates a model of job search with utility costs and benefits triggered by mandatory reemployment programs. I use data from an experiment that generates exogenous variation in the threat of program participation and an increase in the job finding rate. I calculate the impact of the experiment on worker welfare, and find that participants would be willing to give up 1.5–1.7 weeks of unemployment benefits to avoid participation. These welfare costs vary across workers and are larger for workers with weaker employment prospects. Overall, welfare costs are substantial and therefore important to take into account.