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Is there a Threat Effect of Labour Market Programmes? A Study of ALMP in the Danish UI System*


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     I thank the following for helpful comments: Niels Henning Bjoern, Martin Browning (my Ph.D. supervisor), Thomas Crossley, Anders Holm, Torben Tranaes as well as two anonymous referees from this Journal.


This article focuses on unemployed individuals’ reaction to compulsory labour market programmes prior to participation. In Denmark, after having received UI benefits for a given period of time, continued benefits are made conditional on participation in a labour market programme. I estimate individuals’ reaction to compulsory programmes using legislative changes in the duration of benefits period as identification. I find that compulsory programmes do indeed motivate individuals to find employment prior to participation. The effect is large and is even comparable in size to the effect of benefits exhaustion found in studies of American UI systems.