Scandinavian Working Papers in Economics

Working Paper Series,
Uppsala University, Department of Economics

No 2010:11: Dynamic effects of mandatory activation of welfare participants

Anna Persson () and Ulrika Vikman ()
Additional contact information
Anna Persson: Department of Economics, Postal: Uppsala University, P.O. Box 513, SE-751 20 Uppsala, Sweden
Ulrika Vikman: Department of Economics, Postal: Uppsala University, P.O. Box 513, SE-751 20 Uppsala, Sweden

Abstract: Previous literature shows that activation requirements for welfare participants decrease welfare participation. However, the dynamics have not been examined, and often only exit effects 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 affected when activation requirements were introduced at different 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 effects, namely, large effects on entry rates for young individuals. In addition, there are larger effects 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

37 pages, June 16, 2010

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