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An evaluation of the Swedish system of active labour market programmes in the 1990s

  • Barbara Sianesi

    ()

    (Institute for Fiscal Studies and IFS)

The low unemployment rates traditionally enjoyed by Sweden have often been attributed to the country's extensive system of active labour market programmes, which have thus frequently been regarded as a model for other countries to emulate. However, unemployment grew enormously in Sweden when the country was hit by a most severe recession in the early 1990s. This paper investigates how effective the Swedish labour market programmes have been in improving the opportunities of unemployed individuals over the last decade. The analyses look at the performance of the Swedish system in its entirety, combining all the programmes into one and focusing in particular on the interactions between the unemployment benefit system and the programme system. In fact, a labour market programme in Sweden effectively comes as a bundle of two conflicting components: it is intended to equip job-seekers with marketable skills which should improve their opportunities on the labour market, but at the same time it allows to renew eligibility to generous unemployment compensation, thus reinforcing the work disincentive associated with the unemployment insurance system. Using extensive information on the labour market history of more than 110,000 individuals followed for five years, the presence of short- and long-term programme effects is investigated in terms of a number of outcomes, including employment and unemployment benefit collection. More specifically, the analyses relate to how unemployed individuals joining a programme per-form, on average, compared to a hypothetical state where they would have waited longer job-searching in open unemployment. Overall, the impact of the programme system is found to have been mixed. Unemployed individuals who go sooner on a programme (compared to later or never), though remaining initially locked-in in the unemployment system for around six months, subsequently enjoy a higher probability of being in employment for up to at least five years. By contrast, the fact that programme participation en Titles individuals to renewed unemployment compensation creates strong incentives to remain within the official unemployment system. Individuals who have joined a programme are thus found to be more likely to return to benefit-compensated un- employment, to re-enter more programmes in the future, or to alternate between benefits and program participation over time than if they had searched longer as openly unemployed. The positive effect on employment does in fact arise because the programmes considerably reduce the chances of being unemployed outside the official unemployment system.

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Paper provided by Institute for Fiscal Studies in its series IFS Working Papers with number W02/01.

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Length: 47 pp
Date of creation: Jan 2002
Date of revision:
Handle: RePEc:ifs:ifsewp:02/01
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  1. Ham, John C & LaLonde, Robert J, 1996. "The Effect of Sample Selection and Initial Conditions in Duration Models: Evidence from Experimental Data on Training," Econometrica, Econometric Society, vol. 64(1), pages 175-205, January.
  2. Lars Calmfors & Anders Forslund & Maria Hemström, 2002. "Does Active Labour Market Policy Work? Lessons from the Swedish Experiences," CESifo Working Paper Series 675, CESifo Group Munich.
  3. Anders Forslund & Alan B. Krueger, 1994. "An Evaluation of the Swedish Active Labor Market Policy: New and Received Wisdom," NBER Working Papers 4802, National Bureau of Economic Research, Inc.
  4. Skedinger, Per & Lundin, Martin, 2000. "Decentralisation of Active Labour Market Policy: The Case of Swedish Local Employment Service Committees," Working Paper Series 537, Research Institute of Industrial Economics.
  5. Hägglund, Pathric, 2000. "Effects of changes in the unemployment insurance eligibility requirements on job duration - Swedish evidence," Working Paper Series 2000:4, IFAU - Institute for Evaluation of Labour Market and Education Policy.
  6. Rajeev H. Dehejia & Sadek Wahba, 2002. "Propensity Score-Matching Methods For Nonexperimental Causal Studies," The Review of Economics and Statistics, MIT Press, vol. 84(1), pages 151-161, February.
  7. Christoph M. Schmidt, 2000. "Arbeitsmarktpolitische Massnahmen und ihre Evaluierung: eine Bestandsaufnahme," Vierteljahrshefte zur Wirtschaftsforschung / Quarterly Journal of Economic Research, DIW Berlin, German Institute for Economic Research, vol. 69(3), pages 425-437.
  8. Carling, Kenneth & Edin, Per-Anders & Holmlund, Bertil & Jansson, Fredrik, 1995. "Unemployment Duration, Unemployment Benefits, and Labour Market Programmes in Sweden," CEPR Discussion Papers 1200, C.E.P.R. Discussion Papers.
  9. Rajeev H. Dehejia & Sadek Wahba, 1998. "Causal Effects in Non-Experimental Studies: Re-Evaluating the Evaluation of Training Programs," NBER Working Papers 6586, National Bureau of Economic Research, Inc.
  10. Lechner, Michael, 1999. "Earnings and Employment Effects of Continuous Off-the-Job Training in East Germany after Unification," Journal of Business & Economic Statistics, American Statistical Association, vol. 17(1), pages 74-90, January.
  11. Manski, Charles F, 1990. "Nonparametric Bounds on Treatment Effects," American Economic Review, American Economic Association, vol. 80(2), pages 319-23, May.
  12. 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.
  13. Lechner, Michael, 1999. "Identification and Estimation of Causal Effects of Multiple Treatments Under the Conditional Independence Assumption," IZA Discussion Papers 91, Institute for the Study of Labor (IZA).
  14. Heckman, James J & Ichimura, Hidehiko & Todd, Petra E, 1997. "Matching as an Econometric Evaluation Estimator: Evidence from Evaluating a Job Training Programme," Review of Economic Studies, Wiley Blackwell, vol. 64(4), pages 605-54, October.
  15. Heckman, James J & Ichimura, Hidehiko & Todd, Petra, 1998. "Matching as an Econometric Evaluation Estimator," Review of Economic Studies, Wiley Blackwell, vol. 65(2), pages 261-94, April.
  16. Michael Gerfin & Michael Lechner, 2002. "A Microeconometric Evaluation of the Active Labour Market Policy in Switzerland," Economic Journal, Royal Economic Society, vol. 112(482), pages 854-893, October.
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