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The Effect of Sanctions and Active Labour Market Programmes on the Exit Rate From Unemployment

Author

Listed:
  • Nisar Ahmad

    () (School of Economics and Management, University of Aarhus, Denmark)

  • Michael Svarer

    () (School of Economics and Management, University of Aarhus, Denmark)

Abstract

This paper simultaneously investigates the effectiveness of benefit sanctions and active labour market programmes on the exit rate from unemployment using Danish data. In the data about one third of the individuals who are sanctioned also participate in some active labour market programmes (ALMPs). Hence, modeling only one of them as treatment might over or underestimate the true effect. Therefore, by using a multivariate mixed proportional hazard model (MMPH), we model the hazard rate out of unemployment along with the sanction rate and hazard rate into active labour market programmes. We optimally select the number of supports point for the distribution of unobserved heterogeneity. Results show that pre-specifying two support points underestimates the effect of sanctions and active labour market programmes. Failing to control for selectivity for sanctions not only underestimates the treatment effect of sanctions but also biases the treatment effect of ALMPs.

Suggested Citation

  • Nisar Ahmad & Michael Svarer, 2009. "The Effect of Sanctions and Active Labour Market Programmes on the Exit Rate From Unemployment," Economics Working Papers 2009-14, Department of Economics and Business Economics, Aarhus University.
  • Handle: RePEc:aah:aarhec:2009-14
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    File URL: ftp://ftp.econ.au.dk/afn/wp/09/wp09_14.pdf
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    More about this item

    Keywords

    competing risks; unemployment insurance; timing of events ; NPMLE; MMPH;

    JEL classification:

    • C14 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Semiparametric and Nonparametric Methods: General
    • C15 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Statistical Simulation Methods: General
    • C41 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods: Special Topics - - - Duration Analysis; Optimal Timing Strategies
    • J64 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Unemployment: Models, Duration, Incidence, and Job Search
    • J65 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Unemployment Insurance; Severance Pay; Plant Closings
    • J68 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Public Policy

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