Tax and Benefit Reforms in a Model of Labour Market Transitions

This paper discusses developments in the Netherlands concerning unemployment insurance, unemployment assistance and disability insurance. The emphasis is on how financial incentives for individual workers and firms affect flows of benefit recipients. The main message is that it is indeed helpful to screen workers who want to enter the benefit system, to establish counseling and monitoring of workers that are in the benefit system and to impose sanctions on workers or employers that abuse the system. The Dutch experience in reconstructing social security provides clear lessons for other countries.