Effort Commitment in Active Labour Market Programmes: Consequences for Participation Incentives and Wage Formation

Claus Thustrup Hansen and Torben Tranaes (ttr@vive.dk)
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Claus Thustrup Hansen: University of Copenhagen Institute of Economics
Authors registered in the RePEc Author Service: Claus Thustrup Kreiner

No 97-14, Discussion Papers from University of Copenhagen. Department of Economics

Abstract: This paper discusses aspects of active labour market policy implemented in Denmark after 1993. In particular, we consider effort commitment as a mean to provide work incentives for the jobless, which was introduced as an alternative to reducing unemployment benefits. Our main points are (1) that there is less, if any, conflict between high income security and work incentives if effort commitment is applied, and (2) concerning wage setting: the effort-commitment benefit system imply lower wages than a pure benefit system as long as unemployment is not to high. Hence, this kind of active labour market policy does not in general lent itself to the standard objection that active policy exaggerates wage pressure.

Keywords: active labour market policy; effort-commitment; participation incentives, wage setting (search for similar items in EconPapers)
JEL-codes: J22 J30 J65 J68 (search for similar items in EconPapers)
Pages: 31 pages
Date: 1997-11
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Persistent link: https://EconPapers.repec.org/RePEc:kud:kuiedp:9714

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