Lars Pico Geerdsen

This paper analyses the motivation effect of activation programs on wages and employment. We utilise a reform of the Danish UI system in 1998 that reduced the period of unconditional benefits and thereby created exogenous variation in the probability of people entering a mandatory activation program. Wages are measured by their position in the overall wage distribution, and we estimate how this position reacts to an increased probability of an individual being enrolled in activation. The wage effect is estimated using a competing risk duration model with exit states to employment at a higher wage or a lower wage. Overall, we find an increased hazard of exit to employment and of exit to higher-paying jobs as the probability of activation increases, and no change in the exit rate to lower-paying jobs. Thus, increases in the probability of activation counteract the wage decrease that is generally associated with a period of unemployment. These results do not hold for individuals with higher education, for whom we find no employment or wage effects of a higher probability of activation.

This paper focuses on a novel effect of active labor market policies: the effect of workfare on crime. First, the study examines how a series of Danish labor market reforms implemented between the late 1980s and the 1990s affected crime. The reforms introduced more rapid and extensive workfare requirements for unemployed without unemployment insurance, and are therefore useful for determining the effect of workfare on crime. Second, the paper investigates whether the crime-preventive impact of the reforms varies by individual labor market attachment. Third, the study examines whether the crime-reducing effect is weekday-specific, or also affects behavior during weekends when workfare programs are closed.