O’Leary, Christopher J., Paul T. Decker, Stephen A. Wandner. 2005. “Cost-Effectiveness of Targeted Reemployment Bonuses.” Journal of Human Resources 40(1): 270-279.

Targeting reemployment bonus offers to unemployment insurance (UI) claimants identified as most likely to exhaust benefits is estimated to reduce benefit payments. We show that targeting bonus offers with profiling models similar to those in state Worker Profiling and Reemployment Services systems can improve cost effectiveness. Since estimated average benefit payments do not steadily decline as the eligibility screen is gradually tightened, we find that narrow targeting is not optimal. The best candidate is a low bonus amount with a long qualification period, targeted to the half of profiled claimants most likely to exhaust their UI benefit entitlement.

Christopher J. O’Leary is a senior economist at the W. E. Upjohn Institute for Employment Research. Paul T. Decker is Vice President for Human Services Research at Mathematica Policy Research, Inc. Stephen A. Wandner is director of research and demonstrations for the Employment and Training Administration in the United States Department of Labor. The authors thank Walter Corson, Randall Eberts, Lori Kletzer, Jeffrey Smith, Robert Spiegelman, Stephen Woodbury, and seminar participants at the W. E. Upjohn Institute for useful suggestions. Kenneth Kline, Lauren Beaumont, and Susan Miller provided excellent research assistance. Funding for this work was provided by Mathematica Policy Research, the W. E. Upjohn Institute for Employment Research, and the U.S. Department of Labor. Opinions expressed do not necessarily represent those of the funding organizations. The authors accept responsibility for any errors which may remain. The data used in this article can be obtained beginning October 2005 through September 2008 from Ken Kline, W.E. Upjohn Institute for Employment Research, 300 South Westnedge Avenue, Kalamazoo, MI 49007 <Kline@UpjohnInstitute.org>.