Threat Effect of the Labour Market Programmes in Denmark: Evidence from a Natural Experiment

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IZA Seminar

Place: Schaumburg-Lippe-Str. 9, 53113 Bonn

Date: 12.12.2006, 12:15 - 13:30


Presentation by 

Ott Toomet (University of Tartu)


This paper analyses the effect of active labour market programmes on the behaviour of Danish welfare recipients. The Danish compulsory participation rules differ for "young" and "old" individuals. The age boundary between "young" and "old" was increased from 25 to 30 years in 1998. This natural experiment allows us to identify the effect of the "threat" of ALMP participation before the actual participation starts. Using a register-based dataset we focus on the transition intensity out of welfare. We document that the reform led to a substantially higher participation risk for the affected group, the welfare recipients between 25 and 30 years old. The analysis indicates that there was a significant rise in welfare exits for this group, decreasing the survival probability in welfare by by 4 percentage points during 13 weeks.

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