The Effect of Sanctions and Active Labour Market Programmes on the Exit Rate From Unemployment

Nisar Ahmad and Michael Svarer

Economics Working Papers from Department of Economics and Business Economics, Aarhus University

Abstract: This paper simultaneously investigates the effectiveness of benefit sanctions and active labour market programmes on the exit rate from unemployment using Danish data. In the data about one third of the individuals who are sanctioned also participate in some active labour market programmes (ALMPs). Hence, modeling only one of them as treatment might over or underestimate the true effect. Therefore, by using a multivariate mixed proportional hazard model (MMPH), we model the hazard rate out of unemployment along with the sanction rate and hazard rate into active labour market programmes. We optimally select the number of supports point for the distribution of unobserved heterogeneity. Results show that pre-specifying two support points underestimates the effect of sanctions and active labour market programmes. Failing to control for selectivity for sanctions not only underestimates the treatment effect of sanctions but also biases the treatment effect of ALMPs.

Keywords: competing risks; unemployment insurance; timing of events; NPMLE; MMPH (search for similar items in EconPapers)
JEL-codes: C14 C15 C41 J64 J65 J68 (search for similar items in EconPapers)
Pages: 28
Date: 2009-12-04
New Economics Papers: this item is included in nep-ias and nep-lab
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Citations: View citations in EconPapers (1)

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Persistent link: https://EconPapers.repec.org/RePEc:aah:aarhec:2009-14

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