In the Netherlands, the average exit rate out of welfare is dramatically low. Most welfare recipients have to comply with guidelines on job search effort that are imposed by the welfare agency. If they do not, then a sanction in the form of a temporary benefit reduction can be imposed. This article investigates the effect of such sanctions on the transition rate from welfare to work using a unique set of rich register data on welfare recipients. We find that the imposition of sanctions

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... ally increases the individual transition rate from welfare to work. We are grateful to the Welfare Agency (Dienst Sociale Zaken en Werkgelegenheid) of Rotterdam, and to Daan Spannenberg in particular, for kindly providing the data. We thank David Grubb, Jeff Smith, and Maarten Lindeboom for useful comments, and Michael Keane for useful information on the U.S. welfare system. Financial support from the Netherlands Ministry of Social Affairs and Employment is gratefully acknowledged. Contact the corresponding author, Bas van der Klaauw, at Klaauw@tinbergen.nl.