The Threat Effect of Active Labour Market Programmes* |
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Authors: | Michael Rosholm Michael Svarer |
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Affiliation: | 1. Aarhus School of Business, DK‐8210 Aarhus, Denmark rom@asb.dk;2. University of Aarhus, DK‐8000 Aarhus, Denmark msvarer@econ.au.dk |
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Abstract: | In this paper, we estimate the threat effect of active labour market programmes (ALMPs) for a sample of unemployed men in Denmark. Threat effects of such programmes capture the impacts of a system of ALMPs prior to actual participation. Rational economic agents make search decisions based on the expected discounted value of unemployment, and the perceived risk of future participation in programmes may affect job‐search behaviour early in the unemployment spell. We find a strong and significant threat effect, which is shown to reduce average unemployment duration by two and a half weeks. |
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Keywords: | Active labour market policy threat effect timing‐of‐events model duration model C41 J64 |
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