Effects of a Major and Sudden Relaxation of the Benefit Sanction Regime on Labour Market Outcomes of Welfare Recipients

Presenter

Joachim Wolff (Institute for Employment Research)

Coauthors

Gerard J. van den Berg, Arne Uhlendorff and Markus Wolf

Abstract

We analyse the effect of a major reform of benefit sanction rules in the German welfare system. Following a ruling of the Federal Constitutional Court in November 2019, the severity of some benefit sanctions was lowered and the number of new sanctions issued substantially and suddenly dropped. We analyse the effects of this natural experiment on short-run labour market outcomes of welfare recipients before the onset of the COVID-19 pandemic in March 2020. We use administrative data and analyse average treatment effects conditional on survival up to the reform date. First and preliminary findings suggest a negative effect of the reform on the short-run conditional employment transition probability of welfare recipients.