Experimental Evidence on the Effects of Early Meetings and Activation

• Author: Michael Rosholm,Michael Svarer,Jonas Maibom
• Date: 01 July 2017
• Published date: 01 July 2017
• DOI: http://doi.org/10.1111/sjoe.12180

Scand. J. of Economics 119(3), 541–570, 2017

DOI: 10.1111/sjoe.12180

Experimental Evidence on the Effects

of Early Meetings and Activation∗

Jonas Maibom

Aarhus University, DK-8210 Aarhus V, Denmark

maibom@econ.au.dk

Michael Rosholm

Aarhus University, DK-8210 Aarhus V, Denmark

rom@econ.au.dk

Michael Svarer

Aarhus University, DK-8210 Aarhus V, Denmark

msvarer@econ.au.dk

Abstract

We analyse three Danish experiments with combinations of early and intensive active labour

market policy. We find that frequent individual meetings between newly unemployed workers

and their caseworkers have substantial (and significant) effects on employment rates in

both the medium and long run. Group meetings or an “activation wall” show positive but

insignificant effects. Based on information on the costs of running the experiments, active

labour programmes, and public transfer payments, we analyse the impact on government

budgets and we show that individual meetings improved budgets with up to 4,500 euros per

unemployed worker. We also look at the impact for subgroups.

Keywords: Active labour market policy; cost–benefit analysis; randomized social experiment;

treatment effect

JEL classification:J64; J68

I. Introduction

Traditional activation policies (compulsory participation in, for example,

workfare or training programmes) are costly, and often do not help in

terms of bringing unemployed workers quickly back into regular employ-

ment (e.g., Heckman et al., 1999; Kluve, 2010; Card et al., 2010). The

most effective activation instrument seems to be employment subsidies in

the private sector. Unfortunately, private employers are not easily persuaded

∗We are grateful to the Danish Labour Market Board for making data available and for the

CAFE grant enabling part of this research, to Rune Vejlin and seminar participants at IAB,

University of Bergen and SOFI at Stockholm University for valuable comments. Finally, we

thank two anonymous referees for very valuable comments and suggestions.

CThe editors of The Scandinavian Journal of Economics 2016.

542 Effects of early meetings and activation

to participate in such schemes, and it is an often mentioned concern that

these schemes displace regular jobs. Hence, in many countries, this instru-

ment cannot be expanded beyond its current limited use. Traditional training

programmes (e.g., classroom training) are used more often, and they some-

times have positive effects, especially when aimed at specific groups or

disadvantaged workers. However, in general, the evidence regarding their

effectiveness is not compelling, especially not when we take into account

that these programmes are typically quite expensive. One of the problems

with activation is that initially it leads to lock-in effects. This is particu-

larly a problem as, ideally, policies should help the unemployed workers as

early as possible when they become unemployed in order to prevent long-

term unemployment. The risk of lock-in and the associated dead-weight

losses imply that traditional activation policies are potentially ineffective as

preventive measures applied during the early phases of unemployment. In

that sense, these policies are remediation measures rather than prevention

measures. Hence, the need for effective early active policies remains.

In this paper, we present results from three recent randomized field

experiments involving early and intensive active labour market policies

(ALMPs) aimed at newly unemployed workers in Denmark, with the goal

of getting them back into regular employment as soon as possible and

thus preventing long-term unemployment. The three experiments we study

basically contain a combination of two types of interventions: early and

intensive counselling in the form of frequent meetings with caseworkers in

job centres, and a so-called “activation wall”. The latter refers to mandatory

activation employed fairly early during the unemployment spell with the aim

of generating so-called threat effects – the perceived risk of future activation

should, according to this line of thought, lead to increased job search prior

to participation (e.g., Rosholm and Svarer, 2008; van den Berg et al., 2009).

Thus, these experiments investigate the effects of novel policy approaches.

We study the average impacts in both the short and long run. Using detailed

data on the actual implementation of the intended treatment, we show that

data on implementation are important for understanding and interpreting

the results from an experiment, and thus are crucial for improving our

knowledge of the effectiveness of labour market policies. Furthermore, we

have obtained data on the costs of running the various programmes and

the social transfers that participants receive, and we can therefore compare

the realized programme costs and benefits and how they evolve over time,

which is an often neglected part in policy evaluations (Card et al., 2010).1

1Importantly, our analysis incorporates uncertainty from both the benefit side (the estimated

employment effect of the experiment) and the cost side (the sampling uncertainty in the type

of income transfer and ALMPs unemployed individuals participate in) into the calculated

confidence bands associated with the impact of the experiment on government budgets.

CThe editors of The Scandinavian Journal of Economics 2016.