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Experimental Evidence on the Nature of the Danish Employment Miracle

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  • Rosholm, Michael

    (Aarhus University)

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.

Suggested Citation

  • Rosholm, Michael, 2008. "Experimental Evidence on the Nature of the Danish Employment Miracle," IZA Discussion Papers 3620, Institute of Labor Economics (IZA).
  • Handle: RePEc:iza:izadps:dp3620
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    1. What keeps unemployment durations short?
      by René Böheim in Econ Tidbits on 2012-11-19 22:07:00

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    3. van der Klaauw, Bas & Ziegler, Lennart, 2019. "A Field Experiment on Labor Market Speeddates for Unemployed Workers," IZA Discussion Papers 12140, Institute of Labor Economics (IZA).
    4. Katharina Dengler, 2019. "Effectiveness of sequences of classroom training for welfare recipients: what works best in West Germany?," Applied Economics, Taylor & Francis Journals, vol. 51(1), pages 1-46, January.
    5. 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.
    6. Amelie Schiprowski, 2020. "The Role of Caseworkers in Unemployment Insurance: Evidence from Unplanned Absences," Journal of Labor Economics, University of Chicago Press, vol. 38(4), pages 1189-1225.
    7. Torben Andersen & Michael Svarer, 2012. "Active labour market policies in a recession," IZA Journal of Labor Policy, Springer;Forschungsinstitut zur Zukunft der Arbeit GmbH (IZA), vol. 1(1), pages 1-19, December.
    8. Kyyrä, Tomi & Parrotta, Pierpaolo & Rosholm, Michael, 2013. "The effect of receiving supplementary UI benefits on unemployment duration," Labour Economics, Elsevier, vol. 21(C), pages 122-133.
    9. Maibom, Jonas & Rosholm, Michael & Svarer, Michael, 2014. "Can Active Labour Market Policies Combat Youth Unemployment?," IZA Discussion Papers 7912, Institute of Labor Economics (IZA).
    10. Graversen, B.K. & van Ours, J.C., 2009. "How a Mandatory Activation Program Reduces Unemployment Durations : The Effects of Distance," Other publications TiSEM 0071ddbd-1c91-4a52-b1ac-5, Tilburg University, School of Economics and Management.
    11. Blasco, Sylvie & Pertold-Gebicka, Barbara, 2013. "Employment policies, hiring practices and firm performance," Labour Economics, Elsevier, vol. 25(C), pages 12-24.
    12. Andersen, Torben M., 2011. "A Flexicurity Labour Market in the Great Recession: The Case of Denmark," IZA Discussion Papers 5710, Institute of Labor Economics (IZA).
    13. Beam, Emily A., 2016. "Do job fairs matter? Experimental evidence on the impact of job-fair attendance," Journal of Development Economics, Elsevier, vol. 120(C), pages 32-40.
    14. Torben Andersen, 2012. "A Flexicurity Labour Market in the Great Recession: The Case of Denmark," De Economist, Springer, vol. 160(2), pages 117-140, June.
    15. Pieter Gautier & Paul Muller & Bas van der Klaauw & Michael Rosholm & Michael Svarer, 2018. "Estimating Equilibrium Effects of Job Search Assistance," Journal of Labor Economics, University of Chicago Press, vol. 36(4), pages 1073-1125.
    16. Knaus, Michael C. & Lechner, Michael & Strittmatter, Anthony, 2017. "Heterogeneous Employment Effects of Job Search Programmes: A Machine Learning Approach," IZA Discussion Papers 10961, Institute of Labor Economics (IZA).
    17. Michael Rosholm, 2014. "Do case workers help the unemployed?," IZA World of Labor, Institute of Labor Economics (IZA), pages 1-72, August.
    18. Vikström, Johan & Rosholm, Michael & Svarer, Michael, 2011. "The relative efficiency of active labour market policy: evidence from a social experiment and non-parametric methods," Working Paper Series 2011:7, IFAU - Institute for Evaluation of Labour Market and Education Policy.
    19. Arni, Patrick, 2012. "Kausale Evaluation von Pilotprojekten: Die Nutzung von Randomisierung in der Praxis," IZA Standpunkte 52, Institute of Labor Economics (IZA).
    20. Cockx, Bart & Dejemeppe, Muriel, 2010. "The Threat of Monitoring Job Search: A Discontinuity Design," IZA Discussion Papers 5337, Institute of Labor Economics (IZA).
    21. Vikström, Johan & Rosholm, Michael & Svarer, Michael, 2013. "The effectiveness of active labor market policies: Evidence from a social experiment using non-parametric bounds," Labour Economics, Elsevier, vol. 24(C), pages 58-67.
    22. Sørensen, Kenneth Lykke, 2016. "Heterogeneous impacts on earnings from an early effort in labor market programs," Labour Economics, Elsevier, vol. 41(C), pages 266-279.
    23. Nekby, Lena, 2008. "Active labor market programs for the integration of youths and immigrants into the labor market: the Nordic experience," Macroeconomía del Desarrollo 73, Naciones Unidas Comisión Económica para América Latina y el Caribe (CEPAL).
    24. van der Klaauw, Bas & Ziegler, Lennart, 2019. "A Field Experiment on Labor Market Speeddates for Unemployed Workers," CEPR Discussion Papers 13516, C.E.P.R. Discussion Papers.
    25. Knut Røed, 2012. "Active social insurance," IZA Journal of Labor Policy, Springer;Forschungsinstitut zur Zukunft der Arbeit GmbH (IZA), vol. 1(1), pages 1-22, December.

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    More about this item

    Keywords

    treatment effect; labour market policy regime; social experiment; threat effect; duration model;
    All these keywords.

    JEL classification:

    • 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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