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Threat Effect Of The Labour Market Programs In Denmark: Evidence From A Quasi-Experiment


  • Ott Toomet


This paper analyses the pre-participation effect of the Danish active labour market programs on the welfare recipients. The Danish participation rules differ for “young” and “old” individuals. A reform which increased the age boundary between “young” and “old”is used to identify the effect of the “threat” of active labour market program participation before the actual participation starts. We use a register-based dataset and focus on the transition intensity out of welfare. We show that the reform led to a 25% increase in early exit rate for men, which corresponds to effect of halving the benefits. There is no indication that the reform led to exits elsewhere than employment or to lower-quality jobs. The impact on women is smaller, statistically not significant, and partially related to movements to education. There is some evidence that the effect is related to the arrival of specific information (anticipation effect) and it is limited to a number of compliers only.

Suggested Citation

  • Ott Toomet, 2008. "Threat Effect Of The Labour Market Programs In Denmark: Evidence From A Quasi-Experiment," University of Tartu - Faculty of Economics and Business Administration Working Paper Series 62, Faculty of Economics and Business Administration, University of Tartu (Estonia).
  • Handle: RePEc:mtk:febawb:62

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    References listed on IDEAS

    1. Svarer, Michael, 2007. "The Effect of Sanctions on the Job Finding Rate: Evidence from Denmark," IZA Discussion Papers 3015, Institute for the Study of Labor (IZA).
    2. Meyer, Bruce D, 1990. "Unemployment Insurance and Unemployment Spells," Econometrica, Econometric Society, vol. 58(4), pages 757-782, July.
    3. Terry R. Johnson & Daniel H. Klepinger, 1994. "Experimental Evidence on Unemployment Insurance Work-Search Policies," Journal of Human Resources, University of Wisconsin Press, vol. 29(3), pages 665-717.
    4. David Card & Raj Chetty & Andrea Weber, 2007. "The Spike at Benefit Exhaustion: Leaving the Unemployment System or Starting a New Job?," American Economic Review, American Economic Association, vol. 97(2), pages 113-118, May.
    5. 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.
    6. Richardson, Linda L, 2002. "Impact of the Mutual Obligation Initiative on the Exit Behaviour of Unemployment Benefit Recipients: The Threat of Additional Activities," The Economic Record, The Economic Society of Australia, vol. 78(243), pages 406-421, December.
    7. 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.
    8. Ott-Siim Toomet, 2005. "Does an Increase in Unemployment Income Lead to Longer Unemployment Spells? Evidence Using Danish Unemployment Assistance Data," Bank of Estonia Working Papers 2005-09, Bank of Estonia, revised 10 Oct 2005.
    9. Rafael Lalive & Jan C. van Ours & Josef Zweimüller, 2005. "The Effect Of Benefit Sanctions On The Duration Of Unemployment," Journal of the European Economic Association, MIT Press, vol. 3(6), pages 1386-1417, December.
    10. Rosholm, Michael & Svarer, Michael, 2004. "Estimating the Threat Effect of Active Labour Market Programmes," IZA Discussion Papers 1300, Institute for the Study of Labor (IZA).
    11. Ham, John C & Rea, Samuel A, Jr, 1987. "Unemployment Insurance and Male Unemployment Duration in Canada," Journal of Labor Economics, University of Chicago Press, vol. 5(3), pages 325-353, July.
    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. 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.
    14. Torben M. Andersen & Michael Svarer, 2007. "Flexicurity: Labour Market Performance in Denmark," CESifo Economic Studies, CESifo, vol. 53(3), pages 389-429, September.
    15. 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.
    16. 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.
    17. 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, July.
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    Cited by:

    1. Hohmeyer, Katrin & Wolff, Joachim, 2016. "Of carrots and sticks: The effect of workfare announcements on the job search behaviour and reservation wage of welfare recipients," Annual Conference 2016 (Augsburg): Demographic Change 145523, Verein für Socialpolitik / German Economic Association.

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    JEL classification:

    • J64 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Unemployment: Models, Duration, Incidence, and Job Search
    • J68 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Public Policy

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