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Active Labour Market Policies in Denmark: A Comparative Analysis of Post-Program Effects

Blache, Guillaume (2008): Active Labour Market Policies in Denmark: A Comparative Analysis of Post-Program Effects.

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Abstract

The scope of the paper is to estimate post-program effects in fostering good transitions from unemployment to work. Such an issue implies that besides job finding rates, qualitative variables related to work have to be included as well. The evaluation is based on a comprehensive transversal dataset of Danes who ended an activation program in the year 2002, merged with individuals’ profile and retrospective yearly information related to their socioeconomic status, extent of working time and wage level. The control of unobserved heterogeneity and post-program effects are investigated through treatment-effects models. As regards transitions to work and full-time job, main results show fairly large positive effects for private sector employment programs. Smaller positive impacts are found for labour market training and services/sanctions, whereas negative coefficients are assigned to public sector employment programs. All things being equal, the large positive coefficient of the private sector employment programs’ category is the result of its closer link with the “ordinary” labour market which provides “contact effects”. It is worthwhile that job opportunities for private sector employment participants are highly dependent on the business cycle. Besides, this type of programss are submitted to “creaming effects” as unemployed with longer work experience benefit the most from the private sector. The best way to cope with labour shortage is education and training whereas the reduction of public expenditure can be achieved through sanctions programs. The “work first” strategy of this last category of programs is more profitable for the unemployed who benefit from social network. Such a situation leads to “dead-weight effects” thus making public intervention unnecessary. Long-term effects on wages are the most positive for those who where involved into labour market training programs because off the higher return to education in line with human capital theory. Services/sanctions also get fairly positive coefficients for the wage level. Coefficients are not statistically significant for private sector employment programs and are negative for public sector employment. As suggested by previous studies, subsidised programs can indeed be perceived by employers as to be a signal of lower-than-average productivity.

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