Scandinavian Working Papers in Economics

Working Paper Series,
IFAU - Institute for Evaluation of Labour Market and Education Policy

No 2005:17: Causal effects of subsidized career breaks

Oskar Nordström Skans () and Linus Liljeberg ()
Additional contact information
Oskar Nordström Skans: IFAU - Insitute for Evaluation of Labour Market and Education Policy, Postal: Box 513, SE-751 20 Uppsala, Sweden
Linus Liljeberg: IFAU - Insitute for Evaluation of Labour Market and Education Policy, Postal: Box 513, SE-751 20 Uppsala, Sweden

Abstract: The paper uses a quasi-experimental situation to analyze the effects of career interruptions on future labor market outcomes. Data are generated by a Swedish program that granted career breaks to applicants until funds where exhausted. Comparing approved and declined (due to lack of funds) applications allows us to derive “pure” effects of interrupted career that are not confounded by selection or omitted variables. The results show no significant effects on working hours but give some support for increased retirement probabilities among the oldest workers. The average wage effect is negative and in the order of 3 percent 1–2 years after the break. Further evidence suggests that one reason for the large negative wage effects may be related to changes in jobs and tasks.

Keywords: Career interruptions; labor supply; wages; natural experiment

JEL-codes: J22; J24; J26; J31

40 pages, June 30, 2005

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