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Threat Effect of the Labour Market Programs in Denmark: Evidence From a Quasi-Experiment

The University of Tartu Faculty of Economics and Business Administration Working Paper No. 62

48 Pages Posted: 25 Jul 2008  

Ott Toomet

University of Aarhus; Tartu University

Date Written: July 2, 2008

Abstract

This paper analyses the pre-participation effect of the Danish active labour market programs on the welfare recipients. The Danish participation rules differ for "young" and "old" individuals. A reform which increased the age boundary between "young" and "old"is used to identify the effect of the "threat" of active labour market program participation before the actual participation starts. We use a register-based dataset and focus on the transition intensity out of welfare. We show that the reform led to a 25% increase in early exit rate for men, which corresponds to effect of halving the benefits. There is no indication that the reform led to exits elsewhere than employment or to lower-quality jobs. The impact on women is smaller, statistically not significant, and partially related to movements to education. There is some evidence that the effect is related to the arrival of specific information (anticipation effect) and it is limited to a number of compliers only.

Keywords: active labour market programs, threat effect, Denmark

JEL Classification: J64, J68

Suggested Citation

Toomet, Ott, Threat Effect of the Labour Market Programs in Denmark: Evidence From a Quasi-Experiment (July 2, 2008). The University of Tartu Faculty of Economics and Business Administration Working Paper No. 62. Available at SSRN: https://ssrn.com/abstract=1166303 or http://dx.doi.org/10.2139/ssrn.1166303

Ott Toomet (Contact Author)

University of Aarhus ( email )

Nordre Ringgade 1
DK-8000 Aarhus C, 8000
Denmark

Tartu University ( email )

Narva 4-A123
Tartu, 51009
Estonia
+372 737 6374 (Phone)
+372 737 6312 (Fax)

HOME PAGE: http://www.obs.ee/~siim

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