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Experimental Evidence on the Nature of the Danish Employment Miracle

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 University of Aarhus, Aarhus School of Business, Department of Economics in its series Working Papers with number 08-14.

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Length: 62 pages
Date of creation: 01 Jan 2008
Date of revision:
Handle: RePEc:hhs:aareco:2008_014
Contact details of provider: Postal: The Aarhus School of Business, Prismet, Silkeborgvej 2, DK 8000 Aarhus C, Denmark
Phone: +45 89 486396
Fax: +45 8615 5175
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  1. Lars Pico Geerdsen, 2006. "Is there a Threat Effect of Labour Market Programmes? A Study of ALMP in the Danish UI System," Economic Journal, Royal Economic Society, vol. 116(513), pages 738-750, 07.
  2. Bart, COCKX & Muriel, DEJEMEPPE, 2007. "IIs the Notification of Monitoring a Threat to the Unemployed ? A Regression Discontinuity Approach," Discussion Papers (ECON - Département des Sciences Economiques) 2007016, Université catholique de Louvain, Département des Sciences Economiques.
  3. Jaap H. Abbring & Gerard J. van den Berg, 2003. "The Nonparametric Identification of Treatment Effects in Duration Models," Econometrica, Econometric Society, vol. 71(5), pages 1491-1517, 09.
  4. repec:rwi:dpaper:0037 is not listed on IDEAS
  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.
  6. Lalive, R. & van Ours, J.C. & Zweimüller, J., 2002. "The Effect of Benefit Sanctions on the Duration of Unemployment," Discussion Paper 2002-19, Tilburg University, Center for Economic Research.
  7. Kluve, Jochen, 2006. "The Effectiveness of European Active Labor Market Policy," IZA Discussion Papers 2018, Institute for the Study of Labor (IZA).
  8. Heckman, James J. & Lalonde, Robert J. & Smith, Jeffrey A., 1999. "The economics and econometrics of active labor market programs," Handbook of Labor Economics, in: O. Ashenfelter & D. Card (ed.), Handbook of Labor Economics, edition 1, volume 3, chapter 31, pages 1865-2097 Elsevier.
  9. Peter Dolton & Donal O'Neill, 2002. "The Long-Run Effects of Unemployment Monitoring and Work-Search Programs: Experimental Evidence from the United Kingdom," Journal of Labor Economics, University of Chicago Press, vol. 20(2), pages 381-403, Part.
  10. Geerdsen, Lars Pico & Holm, Anders, 2007. "Duration of UI periods and the perceived threat effect from labour market programmes," Labour Economics, Elsevier, vol. 14(3), pages 639-652, June.
  11. 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.
  12. 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.
  13. Blundell, Richard William & Costa Dias, Monica & Meghir, Costas & Van Reenen, John, 2003. "Evaluating the Employment Impact of a Mandatory Job Search Programme," CEPR Discussion Papers 3786, C.E.P.R. Discussion Papers.
  14. Dolton, Peter & O'Neill, Donal, 1996. "Unemployment Duration and the Restart Effect: Some Experimental Evidence," Economic Journal, Royal Economic Society, vol. 106(435), pages 387-400, March.
  15. 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 Evaluation of Labour Market and Education Policy.
  16. Martin, John P. & Grubb, David, 2001. "What works and for whom: a review of OECD countries' experiences with active labour market policies," Working Paper Series 2001:14, IFAU - Institute for Evaluation of Labour Market and Education Policy.
  17. Bruce D. Meyer, 1995. "Lessons from the U.S. Unemployment Insurance Experiments," Journal of Economic Literature, American Economic Association, vol. 33(1), pages 91-131, March.
  18. Hägglund, Pathric, 2006. "Are there pre-programme effects of Swedish active labour market policies? Evidence from three randomised experiments," Working Paper Series 2006:2, IFAU - Institute for Evaluation of Labour Market and Education Policy.
  19. 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.
  20. Kluve, Jochen, 2006. "The Effectiveness of European Active Labor Market Policy," RWI Discussion Papers 37, Rheinisch-Westfälisches Institut für Wirtschaftsforschung (RWI).
  21. Cees Gorter & Guyonne R. J. Kalb, 1996. "Estimating the Effect of Counseling and Monitoring the Unemployed Using a Job Search Model," Journal of Human Resources, University of Wisconsin Press, vol. 31(3), pages 590-610.
  22. Van den Berg, Gerard J., 2001. "Duration models: specification, identification and multiple durations," Handbook of Econometrics, in: J.J. Heckman & E.E. Leamer (ed.), Handbook of Econometrics, edition 1, volume 5, chapter 55, pages 3381-3460 Elsevier.
  23. Abbring, Jaap H & van den Berg, Gerard J, 2005. "Social experiments and intrumental variables with duration outcomes," Working Paper Series 2005:11, IFAU - Institute for Evaluation of Labour Market and Education Policy.
  24. van den Berg, Gerard J. & Kjaersgaard, Lene & Rosholm, Michael, 2012. "To Meet or Not to Meet (Your Case Worker) – That is the Question," IZA Discussion Papers 6476, Institute for the Study of Labor (IZA).
  25. 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.
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