Working Paper Series, Center for Labor Studies,
Uppsala University, Department of Economics

Abstract: Previous literature shows that activation requirements for welfare participants decrease welfare participation. However, the dynamics have not been examined, and often only exit e ects are analyzed. In this paper, we look more closely at the transition rates into and out of welfare. Using register data on the entire population of Stockholm, we are able to capture how both entry and exit rates were a ected when activation requirements were introduced at di erent times in Stockholm’s city districts. The results indicate that the main reduction in welfare participation is due to a small increase in exit rates. The part of the population that is at risk of entering into welfare, though, experiences a reduction in entry rates due to the reform. There are also heterogeneous e ects, namely, large e ects on entry rates for young individuals. In addition, there are larger e ects on exit rates for unmarried individuals without children compared to the population as a whole.

Keywords: Welfare reform; mandatory activation program; welfare entry; welfare exit

JEL-codes: H31; I38

40 pages, June 16, 2010

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