Hybrideseminar – The effects of application processing times and prepayments on welfare receipt and employment

This paper investigates the benefit and employment effects of application processing times and benefit prepayments for welfare applicants. For causal inference we exploit exogenous variation in application processing times and the use of provisional benefit prepayments among randomly assigned caseworkers. The main results are threefold: (i) We find that longer processing times induce self-screening among the applicants with favorable characteristics. (ii) Longer processing times also reduce post-application employment of awarded applicants and may thus result in a longer-term reliance on welfare. (iii) Our results suggest that providing benefit prepayments promotes the future employment outcomes of approved applicants who experience longer processing times. This is consistent with prepayments reducing financial stress, which otherwise hinders successful job search. ~Joint work with Ernst-Jan de Bruijn, Marike Knoef and Pierre Koning.