S-WoPEc
 
Scandinavian Working Papers in Economics
HomeAboutSeriesSubject/JEL codesAdvanced Search
IFAU - Institute for Evaluation of Labour Market and Education Policy Working Paper Series
IFAU - Institute for Evaluation of Labour Market and Education Policy

No 2002:9:
Labor market programs, the discouraged-worker effect, and labor force participation

Kerstin Johansson

Abstract: This paper estimates the macroeconomic effect of labor market programs on labor force participation. Labor market programs could counteract business-cycle variation in the participation rate that is due to the discouraged-worker effect, and they could prevent labor force outflow. An equation that determines the participation rate is estimated with GMM, using panel data (1986-1998) for Sweden's municipalities. The results indicate that labor market programs have relatively large and positive effects on labor force participation. If the number of participants in labor market programs increases temporarily by 100, the labor force increases immediately by around 63 persons. The effect is temporary so the number of participants in the labor force returns to the old level in the next period. If the number of participants in programs is permanently increased, the labor force increases by about 70 persons in the long run. Programs are reducing the business-cycle variation in labor force participation because the effect is positive and programs are counter-cyclical and they counteract the discouraged-worker effect in the long run. The results indicate that programs could prevent labor force outflow; participants who would have left labor force in the abscence of programs are may now be participating because of the programs. Wages and vacancies have positive long- and short-run effects on participation rate. Open unemployment, the job destruction rate, and proportions of persons between ages 18-24 and 55-65 have negative long run effects on the participation rate.

Keywords: Labor supply; labor market programs; dynamic panel data; (follow links to similar papers)

JEL-Codes: E64; J22; J68; (follow links to similar papers)

50 pages, May 30, 2002

Before downloading any of the electronic versions below you should read our statement on copyright.
Download GhostScript for viewing Postscript files and the Acrobat Reader for viewing and printing pdf files.

Full text versions of the paper:

wp02-09.pdf    PDF-file
Download Statistics

Questions (including download problems) about the papers in this series should be directed to Monica Fällgren ()
Report other problems with accessing this service to Sune Karlsson () or Helena Lundin ().

Programing by
Design by Joachim Ekebom

Handle: RePEc:hhs:ifauwp:2002_009 This page was generated on 2016-01-24 15:54:57