Skip to main content Accessibility help
×
Home

Incentive Effects of Cash Benefits among Young People. A Natural Experiment from Norway

  • IDA DRANGE (a1) and NIKLAS JAKOBSSON (a2) (a3)

Abstract

Prior research on active labour market programmes (ALMPs) for young people has revealed either no effect or negative effects on transition rates into employment. In addition to accessing the programme content, participation in ALMPs bestows the right to a supplementary benefit. Yet, the direct effect of this benefit on the use and outcome of ALMPs remains largely unknown. We study the effects of a Norwegian policy that pays much higher benefits to recipients when they reach 19 years of age. This policy provides a natural experimental setting that allows us to utilise the age discontinuity to observe whether young people are more likely to become benefit recipients after their nineteenth birthday, and to estimate the effect of benefits on the labour supply. As age determines the increase in benefits rather than need, it creates a random and exogenous variation in the criteria for allocating cash benefits. We use Norwegian administrative register data that cover all 18 to 19 year olds during the period 2003 to 2012. We find no effect on programme take-up or employment rates. Hence, benefits do not work against the aim of ALMPs and young people's responsiveness to financial incentives cannot explain such programmes’ lack of effects.

Copyright

References

Hide All
Bargain, O. and Doorley, K. (2011), ‘Caught in the trap? Welfare's disincentive and the labor supply of single men’, Journal of Public Economics, 95, 9–10, 1096–110. doi:10.1016/j.jpubeco.2011.05.007
Barr, B., Clayton, S., Whitehead, M., Thielen, K., Burstrom, B., Nylen, L. and Dahl, E. (2010), ‘To what extent have relaxed eligibility requirements and increased generosity of disability benefits acted as disincentives for employment? A systematic review of evidence from countries with well-developed welfare systems’, Journal of Epidemiology & Community Health, 64, 12, 1106–14. doi:10.1136/jech.2010.111401
Bruno, G. S., Marelli, E. and Signorelli, M. (2014), ‘The rise of NEET and youth unemployment in EU regions after the crisis’, Comparative Economic Studies, 56, 4, 592615.
Dickens, R., Riley, R. and Wilkinson, D. (2014), ‘The UK minimum wage at 22 years of age: a regression discontinuity approach’, Journal of the Royal Statistical Society: Series A (Statistics in Society), 177, 1, 95114. doi:10.1111/rssa.12003
Dolado, J. J. (Ed.), (2015), No country for young people. Youth labour market problems in Europe, London: CEPR Press.
Drange, I., Frøyland, K. and Mamelund, S.-E. (2015), Unge mottakere av tiltakspenger. Om betydningen av tiltakspenger for gjennomføring av utdanning og overgang til arbeid [Young recipients of cash benefits. The impact of cash benefits on education and transition to employment], Rapport 2015:3. Oslo: Arbeidsforskningstituttet.
Eriksson, S. and Rooth, D.-O. (2014), ‘Do employers use unemployment as a sorting criterion when hiring? Evidence from a field experiment’, American Economic Review, 104, 3, 1014–39. doi:10.1257/aer.104.3.1014
Falch, N. S., Hardoy, I. and Røed, K. (2011), ‘Mindre arbeidsledighet uten dagpengerettigheter?’, Søkelys på arbeidslivet, 28, 1–2, 135–55.
Fortin, B., Lacroix, G. and Drolet, S. (2004), ‘Welfare benefits and the duration of welfare spells: evidence from a natural experiment in Canada’, Journal of Public Economics, 88, 7–8, 1495–520. doi:https://doi.org/10.1016/S0047-2727(02)00177-9
Gebauer, R. and Vobruba, G. (2003), ‘The open unemployment trap: life at the intersection of labour market and welfare state. The case of Germany’, Journal of Social Policy, 32, 04, 571–87. doi:10.1017/S0047279403007153
Hammer, T. (1999), ‘The influence of different compensation levels of unemployment benefits on job chances among unemployed youth: a comparative study of the Nordic countries’, Acta Sociologica, 42, 2, 123–34. doi:10.1177/000169939904200202
Hardoy, I. (2005), ‘Impact of multiple labour market programmes on multiple outcomes: the case of Norwegian youth programmes’, LABOUR, 19, 3, 425–67. doi:10.1111/j.1467-9914.2005.00312.x
Hyggen, C. (2017), ‘Etterlater arbeidstrening arr hos unge ledige? Et vignett-eksperiment av arbeidsgiveres beslutninger ved ansettelser av unge i Norge, Søkelys på arbeidslivet, 34, 4, 236251. doi: 10.18261/issn.1504-7989-2017-04-01
Hyggen, C. (2008), ‘Change and stability in work commitment in Norway: from adolescence to adulthood’, Journal of Social Policy, 37, 01, 103–23. doi:10.1017/S0047279407001511
Jensen, P., Rosholm, M. and Svarer, M. (2003), ‘The response of youth unemployment to benefits, incentives, and sanctions’, European Journal of Political Economy, 19, 2, 301–16.
Kluve, J. (2010), ‘The effectiveness of European active labor market programs’, Labour Economics, 17, 6, 904–18. doi:https://doi.org/10.1016/j.labeco.2010.02.004
Lalive, R. (2008), ‘How do extended benefits affect unemployment duration? A regression discontinuity approach’, Journal of Econometrics, 142, 2, 785806. doi:https://doi.org/10.1016/j.jeconom.2007.05.013
Larsson, L. (2003), ‘Evaluation of Swedish youth labor market programs’, The Journal of Human Resources, 38, 4, 891927. doi:10.2307/1558784
Lee, D. S. and Lemieux, T. (2010), ‘Regression discontinuity designs in economics’, Journal of Economic Literature, 48, 2, 281355.
Lemieux, T. and Milligan, K. (2008), ‘Incentive effects of social assistance: a regression discontinuity approach’, Journal of Econometrics, 142, 2, 807–28. doi:https://doi.org/10.1016/j.jeconom.2007.05.014
Lorentzen, T. and Dahl, E. (2005), ‘Active labour market programmes in Norway: are they helpful for social assistance recipients?’, Journal of European Social Policy, 15, 1, 2745. doi:10.1177/0958928705049161
Maestas, N., Mullen, K. J. and Strand, A. (2013), ‘Does disability insurance receipt discourage work? Using examiner assignment to estimate causal effects of SSDI receipt’, American Economic Review, 103, 5, 1797–829. doi:10.1257/aer.103.5.1797
Martin, J. P. and Grubb, D. (2001), ‘What works and for whom: a review of OECD countries' experiences with active labour market policies’, Swedish Economic Policy Review, 8, 2, 956.
Rønsen, M. and Skarðhamar, T. (2009), ‘Do welfare-to-work initiatives work? Evidence from an activation programme targeted at social assistance recipients in Norway’, Journal of European Social Policy, 19, 1, 6177. doi:10.1177/0958928708098524
Sletten, M. A. and Hyggen, C. (2013), Ungdom, frafall og marginalisering, Oslo: Forskningsradet.
Strand, A. H., Bråthen, M. and Grønningsæter, A. B. (2015), NAV-kontorenes oppfølging av unge brukere, Oslo: Fafo.
Terum, L. I. and Hatland, A. (2014), ‘Sysselsetting og trygd under arbeidslinja’, Søkelys på arbeidslivet, 31, 1–2, 322.
Van der Klaauw, B. and Van Ours, J. C. (2013), ‘Carrot and stick: how re-employment bonuses and benefit sanctions affect exit rates from welfare’, Journal of Applied Econometrics, 28, 2, 275–96. doi:10.1002/jae.1265
Van Ours, J. C. and Vodopivec, M. (2006), ‘How shortening the potential duration of unemployment benefits affects the duration of unemployment: evidence from a natural experiment’, Journal of Labor Economics, 24, 2, 351–78. doi:10.1086/499976
von Simson, K. (2016), ‘Effekten av arbeidsmarkedstiltak og vikarbyråarbeid på overgang til jobb og utdanning for arbeidsledig ungdom uten fullført videregående skole’, Søkelys på arbeidslivet, 33, 3, 247–68.
von Simson, K. (2012), ‘Veier til jobb for ungdom uten fullført videregående opplæring: kan vikarbyråer og arbeidsmarkedstiltak lette overgangen fra utdanning til arbeidsliv?’, Søkelys på arbeidslivet, 29, 1–2, 7696.
Worth, S. (2003), ‘Adaptability and self-management: a new ethic of employability for the young unemployed?’, Journal of Social Policy, 32, 04, 607–21.
Type Description Title
WORD
Supplementary materials

Drange and Jakobsson supplementary material
Drange and Jakobsson supplementary material 1

 Word (4.8 MB)
4.8 MB

Metrics

Altmetric attention score

Full text views

Total number of HTML views: 0
Total number of PDF views: 0 *
Loading metrics...

Abstract views

Total abstract views: 0 *
Loading metrics...

* Views captured on Cambridge Core between <date>. This data will be updated every 24 hours.

Usage data cannot currently be displayed