Counseling and Monitoring of Unemployed Workers: Theory and Evidence from a Social Experiment

To stimulate the re-employment of unemployed workers, the Dutch local unemployment insurance agencies provide counseling and monitoring. We investigate the effect of this ``active labor market policy'' on the individual transition rate from unemployment to employment. We present a job search model with two search channels and endogenous search effort. This model provides theoretical background on the effects of providing counseling and monitoring. In the empirical analysis we use administrative data which are collected using a social experiment. Our reduced-form estimation results do not show a significant effect of counseling and monitoring on re-employment probabilities. According to our theoretical model this is caused by a shift from informal to formal job search mainly induced by the monitoring.