Working Papers, Department of Economics, Aarhus School of Business, University of Aarhus
The Impact of Active Labour Market Policy on Post-Unemployment Outcomes: Evidence from a Social Experiment in Denmark
() and Michael Rosholm
Abstract: While job search theory predicts that active labour market
policies (ALMPs) can aect post-unemployment outcomes, empirical
evaluations investigating transition rates have mostly focused on the
impact of ALMPs on exit rates from the current unemployment spell. We use a
social experiment, which was conducted in Denmark in 2005-6, to investigate
the eects of a dramatic intensi cation of ALMPs on reemployment stability.
We investigate the nature of this impact. We estimate a duration model with
lagged duration dependence to separately identify \indirect" (via shorter
unemployment duration) and \direct" (through a more ecient matching
process) eects of ALMPs on subsequent employment duration. We nd that
overall intensive activation signi cantly reduces unemployment recurrence
for men, but not for women. When we control for dynamic selection into
employment and lagged duration dependence, the positive impact of the
treatment becomes smaller but remains signi cant. 80% of the global impact
of intensi cation acts through the direct channel for men.
Keywords: Social experiment; labour market policy regime; treatment effect; post-unemployment outcome; duration model; lagged duration dependence; dynamic selection; (follow links to similar papers)
JEL-Codes: C21; C41; J64; J68; (follow links to similar papers)
39 pages, March 1, 2011
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