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The Threat Effect of Active Labour Market Programmes

Michael Rosholm () and Michael Svarer ()

Scandinavian Journal of Economics, 2008, vol. 110, issue 2, 385-401

Abstract: In this paper, we estimate the threat effect of active labour market programmes (ALMPs) for a sample of unemployed men in Denmark. Threat effects of such programmes capture the impacts of a system of ALMPs prior to actual participation. Rational economic agents make search decisions based on the expected discounted value of unemployment, and the perceived risk of future participation in programmes may affect job-search behaviour early in the unemployment spell. We find a strong and significant threat effect, which is shown to reduce average unemployment duration by two and a half weeks. Copyright © The editors of the "Scandinavian Journal of Economics" 2008 .

Date: 2008
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Scandinavian Journal of Economics is currently edited by Richard Friberg, Matti Liski and Kjetil Storesletten

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