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Experimental Evidence on the Nature of the Danish Employment Miracle

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Author Info
Rosholm, Michael () (Aarhus School of Business)

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Abstract

This paper uses a social experiment in labour market policy – providing early and intensive monitoring and programme participation in unemployment spells – to assess the nature of labour market policy effectiveness. The experiment was conducted in two counties in Denmark during the winter of 2005-6. The treatment consisted of a dramatic intensification of labour market policies. The results show that the intensification of labour market policies is highly effective, leading to increases in the exit rate from unemployment ranging from 20 to 40%. When introducing time-varying indicators for the various specific treatments actually prescribed to the unemployed workers, none of those treatments have a positive effect on the exit rate from unemployment, neither during the week in which the activity takes place, nor after the activity is completed. However, when the estimated risk of participating in an activity is included as an explanatory variable, it removes the difference in job-finding rates between treatment and control groups completely in one of the counties, and reduces it dramatically and renders it insignificant in the other county. The interpretation we attach to these results is the following; since individual treatments do not appear to be effective per se, but the risk of treatment is, it must be that the intensification of the policy regime increases the job-finding rate of unemployed workers.

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Paper provided by Institute for the Study of Labor (IZA) in its series IZA Discussion Papers with number 3620.

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Date of creation: Jul 2008
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Handle: RePEc:iza:izadps:dp3620

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Related research
Keywords: treatment effect; labour market policy regime; social experiment; threat effect; duration model;

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Find related papers by JEL classification:
J64 - Labor and Demographic Economics - - Mobility, Unemployment, and Vacancies - - - Unemployment: Models, Duration, Incidence, and Job Search
J65 - Labor and Demographic Economics - - Mobility, Unemployment, and Vacancies - - - Unemployment Insurance; Severance Pay; Plant Closings
J68 - Labor and Demographic Economics - - Mobility, Unemployment, and Vacancies - - - Public Policy

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References listed on IDEAS
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.:
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    Other versions:
  2. Gerard J. van den Berg & Bas van der Klaauw, 2006. "Counseling And Monitoring Of Unemployed Workers: Theory And Evidence From A Controlled Social Experiment," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 47(3), pages 895-936, 08. [Downloadable!] (restricted)
    Other versions:
  3. Richardson, Katarina & van den Berg, Gerard J., 2002. "The effect of vocational employment training on the individual transition rate from unemployment to work," Working Paper Series 2002:8, IFAU - Institute for Labour Market Policy Evaluation. [Downloadable!]
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  5. Bruno, CREPON & Muriel, DEJEMEPPE & Marc, GURGAND, 2005. "Counseling the unemployed : does it lower unemployment duration and recurrence ?," Discussion Papers (ECON - Département des Sciences Economiques) 2005034, Université catholique de Louvain, Département des Sciences Economiques. [Downloadable!]
    Other versions:
  6. Van den Berg, Gerard J., 2000. "Duration Models: Specification, Identification, and Multiple Durations," MPRA Paper 9446, University Library of Munich, Germany. [Downloadable!]
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  7. Jensen, Peter & Rosholm, Michael & Svarer, Michael, 2003. "The response of youth unemployment to benefits, incentives, and sanctions," European Journal of Political Economy, Elsevier, vol. 19(2), pages 301-316, June. [Downloadable!] (restricted)
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  14. Jochen Kluve & Christoph M. Schmidt, 2002. "Can training and employment subsidies combat European unemployment?," Economic Policy, CEPR, CES, MSH, vol. 17(35), pages 409-448, October. [Downloadable!] (restricted)
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  18. Dan A. Black & Jeffrey A. Smith & Mark C. Berger & Brett J. Noel, 2003. "Is the Threat of Reemployment Services More Effective Than the Services Themselves? Evidence from Random Assignment in the UI System," American Economic Review, American Economic Association, vol. 93(4), pages 1313-1327, September. [Downloadable!]
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(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. Graversen, B.K. & Ours, J.C. van, 2009. "How a Mandatory Activation Program Reduces Unemployment Durations: The Effects of Distance," Discussion Paper 2009-18, Tilburg University, Center for Economic Research. [Downloadable!]
  2. Krogh Graversen, Brian & van Ours, Jan C, 2009. "How a Mandatory Activation Program Reduces Unemployment Durations; the Effects of Distance," CEPR Discussion Papers 7233, C.E.P.R. Discussion Papers. [Downloadable!] (restricted)
  3. Graversen, Brian Krogh & van Ours, Jan C., 2009. "How a Mandatory Activation Program Reduces Unemployment Durations: The Effects of Distance," IZA Discussion Papers 4079, Institute for the Study of Labor (IZA). [Downloadable!]
  4. Tomi Kyyrä & Pierpaolo Parrotta & Michael Rosholm, 2009. "The effect of receiving supplementary UI benefits on unemployment duration," Working Papers 1, Government Institute for Economic Research Finland (VATT). [Downloadable!]
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