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The Impact of Active Labor Market Programs and Benefit Entitlement on the Duration of Unemployment

The Impact of Active Labor Market Programs and Benefit Entitlement on the Duration of Unemployment
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  The Impact of Active Labor Market Programs and Benefit Entitlement Rules on the Duration of Unemployment Rafael Lalive IEW, University of Zurich Jan C. van Ours CentER, Department of Economics, Tilburg University, CEPR, Institute for Labor Studies (OSA) and IZA, Bonn Josef Zweimüller IEW, University of Zurich, CEPR, London and IZA, Bonn Discussion Paper No. 149 May 2000 IZA P.O. Box 7240 D-53072 Bonn Germany Tel.: +49-228-3894-0 Fax: +49-228-3894-210 Email: iza@iza.org This Discussion Paper is issued within the framework of IZA’s research areas The Welfare State and Labor Markets and Project Evaluation.  Any opinions expressed here are those of the author(s) and not those of the institute. Research disseminated by IZA may include views on policy, but the institute itself takes no institutional policy positions. The Institute for the Study of Labor (IZA) in Bonn is a local and virtual international research center and a place of communication between science, politics and business. IZA is an independent, nonprofit limited liability company (Gesellschaft mit beschränkter Haftung) supported by the Deutsche Post AG. The center is associated with the University of Bonn and offers a stimulating research environment through its research networks, research support, and visitors and doctoral programs. IZA engages in (i) srcinal and internationally competitive research in all fields of labor economics, (ii) development of policy concepts, and (iii) dissemination of research results and concepts to the interested public. The current research program deals with (1) mobility and flexibility of labor markets, (2) internationalization of labor markets and European integration, (3) the welfare state and labor markets, (4) labor markets in transition, (5) the future of work, (6) project evaluation and (7) general labor economics. IZA Discussion Papers often represent preliminary work and are circulated to encourage discussion. Citation of such a paper should account for its provisional character.  IZA Discussion Paper No. 149 May 2000 ABSTRACT The Impact of Active Labor Market Programs and Benefit Entitlement Rules on the Duration of Unemployment ∗∗∗∗   Swiss policy makers created a unique link between unemployment benefits and Active Labor Market Programs (ALMPs) by making benefit payments conditional on program attendance after 7 months of unemployment duration. We evaluate the effect of Active Labor Market Programs and benefit entitlement on the duration of unemployment in Switzerland. In the evaluation we allow for selectivity affecting the inflow into programs. Our results indicate that (i)  After   ALMP-participation the transition rate to jobs increases for Swiss women but not for Swiss men. However, the job hazard rate is strongly reduced during   participation. Taken together, this leads to the conclusion that programs prolong unemployment duration for men, but tend to shorten durations for women. (ii) Once the unemployment spell approaches the expiration of unconditional benefit entitlement the job-hazard rate increases strongly, both for women and for men. (iii) There are important selectivity effects for Swiss females, but not for Swiss males. JEL Classification : C14, C41, J64, I38 Keywords:Active labor market policy, benefit entitlement, treatment effect, bivariate duration model   Jan C. van Ours CentER, Tilburg University, P.O. Box 90153, 5000 LE Tilburg, The Netherlands Tel.: +31-13-4662316 Fax: +31-13-4663042 Email : vanours@kub.nl   ∗   We thank M. Curti and J. Gast of the Swiss State Secretariat for Economic Affairs for help concerning the data and information on institutional details. For comments on earlier versions of the paper we thank seminar participants of the Workshop for Young Economists at ZEW, at IZA, the annual meeting of the population economics section of the German Economic Association, and in particular Wolfgang Franz, Michael Gerfin, Lorenz Goette, Michael Lechner, Patrick Puhani, Frank Reize, Viktor Steiner, Gerard van den Berg, and Rudolf Winter-Ebmer.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
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