Why is Unemployment so Low in Denmark? Evidence from Four Social Experiments
Michael Rosholmy Aarhus University, CAFE and IZA Michael Svarer Aarhus University, CAFE and IZA Jonas Maibom Pedersen Aarhus University, CAFE
February 15, 2012
Abstract We analyse the e¤ects of four randomised experiments in active labour market policy conducted in Denmark in 2008. The experiments entailed di¤erent combinations of early and intensive treatment in terms of meetings and activation. The e¤ects are remarkable; fortnightly individual meetings between newly unemployed workers and case workers can increase employment rates over the next two years by 10% corresponding to 5 weeks. For men, we …nd evidence of a large threat e¤ect of having to participate in early activaiton programmes, while no such e¤ect is found for women. In general, we …nd large di¤erences between men and women, especially in the exact timing of the e¤ects. We conduct a cost-bene…t analysis of each of the four experiments and …nd that individual meetings yield the largest net gains to society. JEL-Codes: J64, J68 Keywords: Social experiment, treatment e¤ect, active labour market policy, cost-bene…t analysis
Acknowledgement: We are grateful to the Danish Labour Market Board for making data available and for the CAFE grant enabling part of this research, to seminar participants at the university of Bergen and SOFI at Stockholm University for valuable commments. y Corresponding author: Michael Rosholm, Department of Economics and Business, Aarhus University, Hermodsvej 22, 8230 Åbyhøj, Denmark. Email: rom@asb.dk. Phone: +45 8948 6198.
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Introduction
This paper reports results on four randomised social experiments involving early and intensive active labour market policy conducted in Denmark in 2008. The intensi…cation consisted of a dramatic increase in counseling and monitoring and of early mandatory activation programs. These experiments shed light on the nature of active labour market...