Do labor market programs affect labor force participation?
AbstractThis 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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Bibliographic InfoPaper provided by IFAU - Institute for Evaluation of Labour Market and Education Policy in its series Working Paper Series with number 2002:3.
Length: 23 pages
Date of creation: 30 Jan 2002
Date of revision:
Publication status: Published in Swedish Economic Policy Review, 2001, pages 215-234.
labor supply; labor market programs; dynamic panel data;
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, Vacancies, and Immigrant Workers - - - Public Policy
This paper has been announced in the following NEP Reports:
- NEP-ALL-2002-03-04 (All new papers)
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