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Do labor market programs affect labor force participation?

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Author Info
Johansson, Kerstin (IFAU - Office of Labour Market Policy Evaluation)
Abstract

This paper estimates the macroeconomic effect of labor market programs on labor force participation. Labor market programs could counteract businesscycle variation in the participation rate that is due to the discouraged-worker effect, and they could prevent labor force outflow. An equation that determines the participation rate is estimated using panel data (1986-1998) for Sweden’s municipalities. The results indicate that labor market programs have relatively large and positive effects on labor force participation. If the number of participants in labor market programs increases temporarily by 100, the labor force increases by around 63 persons. The effect is temporary so the number of participants in the labor force returns to the old level in the next period. If the number of participants in programs is permanently increased, the labor force increases by around 70 persons. The results indicate that programs prevent labor force outflow because participants who would have left the labor force in the absence of programs are now participating because of the programs. Income and vacancies have positive long- and short-run effects on participation rate. Open unemployment, job destruction rate, and proportion of persons be-tween ages 18-24 and 55-65 have negative long-run effects on the participation rate.

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Publisher Info
Paper provided by IFAU - Institute for Labour Market Policy Evaluation in its series Working Paper Series with number 2002:3.

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Length: 23 pages
Date of creation: 30 Jan 2002
Date of revision:
Publication status: Published in Swedish Economic Policy Review, 2001, pages 215-234.
Handle: RePEc:hhs:ifauwp:2002_003

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Postal: Labour Market Policy Evaluation, P O Box 513, SE-751 20 Uppsala, Sweden
Phone: (+46) 18 - 471 70 70
Fax: (+46) 18 - 471 70 71
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Web page: http://www.ifau.se/
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Related research
Keywords: labor supply; labor market programs; dynamic panel data;

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Find related papers by JEL classification:
E64 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Incomes Policy; Price Policy
J22 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Time Allocation and Labor Supply
J68 - Labor and Demographic Economics - - Mobility, Unemployment, and Vacancies - - - Public Policy

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References listed on IDEAS
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  1. Arellano, Manuel & Bond, Stephen, 1991. "Some Tests of Specification for Panel Data: Monte Carlo Evidence and an Application to Employment Equations," Review of Economic Studies, Blackwell Publishing, vol. 58(2), pages 277-97, April. [Downloadable!] (restricted)
  2. Holmlund, Bertil & Linden, Johan, 1993. "Job matching, temporary public employment, and equilibrium unemployment," Journal of Public Economics, Elsevier, vol. 51(3), pages 329-343, July. [Downloadable!] (restricted)
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  3. Dahlberg, M. & Forslund, A., 1999. "Direct Displacement Effects of Labour Market Programmes: the Case of Sweden," Papers 1999:22, Uppsala - Working Paper Series.
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  4. Blundell, Richard & Bond, Stephen, 1998. "Initial conditions and moment restrictions in dynamic panel data models," Journal of Econometrics, Elsevier, vol. 87(1), pages 115-143, August. [Downloadable!] (restricted)
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Cited by:
(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. Öckert, Björn, 2002. "Do university enrollment constraints affect education and earnings?," Working Paper Series 2002:16, IFAU - Institute for Labour Market Policy Evaluation. [Downloadable!]
  2. Andrén, Thomas & Gustafsson, Björn, 2002. "Income effects from labor market training programs in Sweden during the 80's and 90's," Working Paper Series 2002:15, IFAU - Institute for Labour Market Policy Evaluation. [Downloadable!]
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