The Impact of Active Labour Market Policy on Post-Unemployment Outcomes: Evidence from a Social Experiment in Denmark

Sylvie Blasco and Michael Rosholm

No 5631, IZA Discussion Papers from Institute of Labor Economics (IZA)

Abstract: While job search theory predicts that active labour market policies (ALMPs) can affect post-unemployment outcomes, empirical evaluations investigating transition rates have mostly focused on the impact of ALMPs on exit rates from the current unemployment spell. We use a social experiment, which was conducted in Denmark in 2005-6, to investigate the effects of a dramatic intensification of ALMPs on reemployment stability. We investigate the nature of this impact. We estimate a duration model with lagged duration dependence to separately identify "indirect" (via shorter unemployment duration) and "direct" (through a more efficient matching process) effects of ALMPs on subsequent employment duration. We find that overall intensive activation significantly reduces unemployment recurrence for men, but not for women. When we control for dynamic selection into employment and lagged duration dependence, the positive impact of the treatment becomes smaller but remains significant. 80% of the global impact of intensification acts through the direct channel for men.

Keywords: social experiment; labour market policy regime; treatment effect; post-unemployment outcome; duration model; lagged duration dependence; dynamic selection (search for similar items in EconPapers)
JEL-codes: C21 C41 J64 J68 (search for similar items in EconPapers)
Pages: 37 pages
Date: 2011-04
New Economics Papers: this item is included in nep-eur and nep-lab
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Citations: View citations in EconPapers (17)

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Working Paper: The Impact of Active Labour Market Policy on Post-Unemployment Outcomes: Evidence from a Social Experiment in Denmark (2011)
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