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The Economic Research Institute, Stockholm School of Economics SSE/EFI Working Paper Series in Economics and Finance

No 293:
Estimating the Effects of Vocational Rehabilitation Programs in Sweden

Almas Heshmati () and Lars-Gunnar Engström

Abstract: This paper estimates the effects of vocational rehabilitation on the probability of improved health status and the reintegration of program participants in the labor market. Bivariate probit models are used to estimate the probability of selection to a rehabilitation program, its effect on the restored work capacity of the participants and their rejoining the labor market. The empirical application is based on a sample of individuals that qualified for the vocational rehabilitation programs and were residing in Western Sweden with long-term sickness observed during 1991 to 1994. The results show variations in the fraction of the sample selected to participate in the rehabilitation programs, the program effects and the importance of individual heterogeneity for the outcome of programs. Participation in the vocational rehabilitation program is found to have a positive effect on the participants' health status and on their rate of return to work. There was no evidence of selection based upon the unobservable characteristics of individuals that are most likely to regain their health or individuals with a higher potential to gain re-employment. The social aspects and health related needs of the participants are more important than the economic efficiency of the vocational rehabilitation programs.

Keywords: Vocational rehabilitation; long-term sickness; returns to work; Sweden; (follow links to similar papers)

JEL-Codes: E24; H43; J31; (follow links to similar papers)

19 pages, January 13, 1999, Revised September 10, 1999

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This paper is published as:
Heshmati, Almas and Lars-Gunnar Engström, (2001), 'Estimating the Effects of Vocational Rehabilitation Programs in Sweden' in Lechner, Michael and Friedhelm Pfeiffer (eds.) Econometric Evaluation of Labour Market Policies, chapter 8, pages 183-210, Heidelberg, Physica (a Springer-Verags Company), Zentrum fur Europäische Wirtshaftsforschung GmbH (ZEW).



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