The effect of benefit sanctions on job finding
The Danish flexicurity model relies on active labor market policies (ALMP) to reduce the disincentive effects of the fairly generous unemployment insurance (UI) benefits. While the effectiveness of some types of ALMP on helping workers to find job is unclear (Kluve, 2010), the conclusion in the literature is that sanctioning unemployed, who do not comply with the rules of the UI system, enhance the exit rate from unemployment.1 In fact, existing studies tend to find that when job seekers experience a sanction, their exit rate from unemployment increases by 25-100 percent. In Denmark, 3 percent of UI recipients and 24 percent of social assistance recipients have been imposed a sanction (Ekspertgruppen, 2014). Svarer (2011) finds for Denmark that sanctioning UI recipients increase the exit rate from unemployment increase by more than 100 percent. Most of this effect takes place in the first month after the sanction has been imposed.