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Labor Market Programs, the Discouraged-Worker Effect, and Labor Force Participation

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  • Johansson, Kerstin

    ()
    (Institute for Labour Market Policy Evaluation)

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    Abstract

    This paper estimates the macroeconomic effect of labor market programs on labor force participation. Labor market programs could counteract business-cycle 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 with GMM, 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 immediately 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 about 70 persons in the long run.

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    Bibliographic Info

    Paper provided by Uppsala University, Department of Economics in its series Working Paper Series with number 2002:16.

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    Length: 50 pages
    Date of creation: 15 May 2002
    Date of revision:
    Handle: RePEc:hhs:uunewp:2002_016

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    Postal: Department of Economics, Uppsala University, P. O. Box 513, SE-751 20 Uppsala, Sweden
    Phone: + 46 18 471 25 00
    Fax: + 46 18 471 14 78
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    Web page: http://www.nek.uu.se/
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    Related research

    Keywords: Labor supply; Labor market programs; Dynamic panel data;

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    References

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    1. Dahlberg, Matz & Forslund, Anders, 1999. "Direct displacement effects of labour market programmes: the case of Sweden," Working Paper Series, IFAU - Institute for Evaluation of Labour Market and Education Policy 1999:7, IFAU - Institute for Evaluation of Labour Market and Education Policy.
    2. repec:rus:hseeco:10108 is not listed on IDEAS
    3. 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.
    4. 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, Wiley Blackwell, vol. 58(2), pages 277-97, April.
    5. Burda, Michael C & Wyplosz, Charles, 1993. "Gross Worker and Job Flows in Europe," CEPR Discussion Papers 868, C.E.P.R. Discussion Papers.
    6. Calmfors, Lars & Forslund, Anders & Hemström, Maria, 2002. "Does Active Labour Market Policy Work? Lessons from the Swedish Experiences," Seminar Papers 700, Stockholm University, Institute for International Economic Studies.
    7. Holmlund, B. & Linden, J., 1991. "Job Matching, Temporary Public Employment, and Equilibrium Unemployment," Papers 1991l, Uppsala - Working Paper Series.
    8. Forslund, Anders & Kolm, Ann-Sofie, 2000. "Active labour market policies and real-wage determination - Swedish evidence," Working Paper Series, IFAU - Institute for Evaluation of Labour Market and Education Policy 2000:7, IFAU - Institute for Evaluation of Labour Market and Education Policy.
    9. Frank Windmeijer, 2000. "A finite sample correction for the variance of linear two-step GMM estimators," IFS Working Papers, Institute for Fiscal Studies W00/19, Institute for Fiscal Studies.
    10. Richard Blundell & Steve Bond & Frank Windmeijer, 2000. "Estimation in dynamic panel data models: improving on the performance of the standard GMM estimator," IFS Working Papers, Institute for Fiscal Studies W00/12, Institute for Fiscal Studies.
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    Cited by:
    1. Andrén, Thomas & Gustafsson, Björn Anders, 2002. "Income Effects from Labor Market Training Programs in Sweden During the 80’s and 90’s," IZA Discussion Papers 603, Institute for the Study of Labor (IZA).
    2. Boone, Jan & Fredriksson, Peter & Holmlund, Bertil & van Ours, Jan C., 2001. "Optimal Unemployment Insurance with Monitoring and Sanctions," IZA Discussion Papers 401, Institute for the Study of Labor (IZA).
    3. Öckert, Björn, 2002. "Do university enrollment constraints affect education and earnings?," Working Paper Series, IFAU - Institute for Evaluation of Labour Market and Education Policy 2002:16, IFAU - Institute for Evaluation of Labour Market and Education Policy.
    4. Hesselius, Patrik, 2003. "Does Sick Absence Increase the Risk of Unemployment?," Working Paper Series, Uppsala University, Department of Economics 2003:15, Uppsala University, Department of Economics.

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