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Effort Commitment in Active Labour Market Programmes: Consequences for Participation Incentives and Wage Formation

Author

Listed:
  • Claus Thustrup Hansen

    (University of Copenhagen Institute of Economics)

  • Torben Tranæs

    (University of Copenhagen Institute of Economics)

Abstract

This paper discusses aspects of active labour market policy implemented in Denmark after 1993. In particular, we consider effort commitment as a mean to provide work incentives for the jobless, which was introduced as an alternative to reducing unemployment benefits. Our main points are (1) that there is less, if any, conflict between high income security and work incentives if effort commitment is applied, and (2) concerning wage setting: the effort-commitment benefit system imply lower wages than a pure benefit system as long as unemployment is not to high. Hence, this kind of active labour market policy does not in general lent itself to the standard objection that active policy exaggerates wage pressure.

Suggested Citation

  • Claus Thustrup Hansen & Torben Tranæs, 1997. "Effort Commitment in Active Labour Market Programmes: Consequences for Participation Incentives and Wage Formation," Discussion Papers 97-14, University of Copenhagen. Department of Economics.
    • Handle: RePEc:kud:kuiedp:9714
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    More about this item

    Keywords

    active labour market policy; effort-commitment; participation incentives; wage setting;
    All these keywords.

    JEL classification:

    • J22 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Time Allocation and Labor Supply
    • J30 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - General
    • 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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