Costs and Benefits of Danish Active Labor Market Programs

Abstract:

Since 1994, unemployed workers in the Danish labor market have participated in active labor market programs at a large scale. This paper contributes with an assessment of costs and benefits of these programs. Longterm treatment effects are estimated on a very detailed administrative dataset by propensity score matching. For the years 1995-2000 it is found that private job training has positive employment and earnings effects, but also public job training and classroom training end up with positive effects when a long enough time horizon is allowed. When the cost side is taken into account, then all three program types come out with surplusses. However, over time the effectiveness of the programs seems to change for the worse as only private job training is socially desirable for a sample of unemployed followed in 1998-2000.