Work requirements, benefit sanctions and information frictions

Last registered on June 28, 2021

Pre-Trial

Trial Information

General Information

Title
Work requirements, benefit sanctions and information frictions
RCT ID
AEARCTR-0007884
Initial registration date
June 26, 2021
Last updated
June 28, 2021, 5:51 PM EDT

Locations

Region

Primary Investigator

Affiliation
University of Copenhagen

Other Primary Investigator(s)

PI Affiliation

Additional Trial Information

Status
Completed
Start date
2018-08-15
End date
2019-12-31
Secondary IDs
Abstract
Requirements in combination with punitive sanctions are commonly used to incentivize unemployed workers to search for and accept jobs, but incomplete information may limit their effectiveness. In a large-scale field experiment, we investigate how relaxing informational constraints regarding a requirement to work a minimum number of hours affects labor market outcomes of welfare benefit recipients in Denmark. The experimental design allows us to disentangle the effect of providing (i) general information about existing work requirements for welfare recipients, and (ii) personalized information about the benefit recipients personal risk of falling short of target. This allows us to investigate how individuals' awareness of the requirement affects and uncertainty about the risk of being sanctioned affects the labor market of unemployed workers.
External Link(s)

Registration Citation

Citation
Cairo, Sofie and Robert Mahlstedt. 2021. "Work requirements, benefit sanctions and information frictions." AEA RCT Registry. June 28. https://doi.org/10.1257/rct.7884-1.0
Sponsors & Partners

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Experimental Details

Interventions

Intervention(s)
Intervention Start Date
2018-08-15
Intervention End Date
2019-01-31

Primary Outcomes

Primary Outcomes (end points)
Employment, earnings, benefit receipt 12 months after start of intervention
Primary Outcomes (explanation)
Labor market outcomes (cumulated over 12 months) are obtained from administrative records from Statistics Denmark.

Secondary Outcomes

Secondary Outcomes (end points)
Secondary Outcomes (explanation)

Experimental Design

Experimental Design
Recipients of welfare benefits in Denmark are required to work at least 225 hours within a 12-months period or face the risk of a permanent benefit reduction. If the welfare recipient does not comply with the work requirement, a benefit sanction is imposed that reduces the individual's benefit level by approx. 500 to 1,000DKK per month depending on the individual's personal situation. The criteria must be fulfilled at each point in time.

Our experiment builds on the fact that the individual welfare recipient faces a substantial degree of uncertainty regarding their personal risk of receiving a benefit sanction, respectively the likelihood of being released from an existing sanction. The information intervention targets two groups of individuals from the stock of welfare recipients. First, the at-risk group has been officially notified that they are subject to the requirement and that they stand to incur a benefit reduction if they do not work additional hours. Second, the sanctioned group contains all benefit recipients who already receive benefits at a reduced level. They have to collect additional working hours in order to be released from the sanction and to receive the full amount of benefits again.

We divide both groups of welfare recipients into three treatment arms:

First, the control group receives no additional information beyond the official notification letters (which is sent out once the individual receives welfare benefits for six months).

Second, individuals in the message treatment receive up to six additional monthly reminders. The at-risk group is reminded that they still stand to incur a reduction, while the sanctioned group is informed that they currently only receive a reduced amount of welfare benefits. Independently of the target group, the messages contain general information about the requirement of working 225 hours per year and provides some examples on how to fulfill the criteria. It emphasizes the risk of receiving reduced welfare benefits and the importance to keep an overview of one's collected working hours. It does not provide personalized information, on how many hours the specific individual has to work in order to avoid or remove the sanction.

Third, the tool treatment additionally provides personalized information about the collected working hours and the deadline for rule compliance. This allows the individual to infer what is exactly required to comply with the criteria to receive the full level of welfare benefits. As in the message treatment, individuals receive monthly reminders containing the same information, but the message also includes a link to an online tool that provides personalized information about the collected working hours and the deadline for compliance. For the at-risk group, the tool displays the next potential reduction date and graphically illustrates how many hours the individual has already worked within the 12-month window prior to the reduction date. For those who are already sanctioned the tool illustrates the number of hours worked, since the imposition of the sanction. Finally, the tool also provides more detailed general information about the 225-hours rule, which is accessible by pressing information buttons on the tool-webpage.
Experimental Design Details
Randomization Method
randomization done in office by a computer
Randomization Unit
Individual benefit recipients
Was the treatment clustered?
No

Experiment Characteristics

Sample size: planned number of clusters
approx. 60000 individuals (about 45000 are at risk and about 15000 are already sanctioned)
Sample size: planned number of observations
approx. 60000 individuals (about 45000 are at risk and about 15000 are already sanctioned)
Sample size (or number of clusters) by treatment arms
1/3 of the population in each treatment arm (control group, message treatment, tool treatment)
Minimum detectable effect size for main outcomes (accounting for sample design and clustering)
IRB

Institutional Review Boards (IRBs)

IRB Name
IRB Approval Date
IRB Approval Number

Post-Trial

Post Trial Information

Study Withdrawal

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Intervention

Is the intervention completed?
No
Data Collection Complete
Data Publication

Data Publication

Is public data available?
No

Program Files

Program Files
Reports, Papers & Other Materials

Relevant Paper(s)

Reports & Other Materials