Effects of Manpower Policies on Duration Dependence in Re-employment Rates: The Example of Sweden.

Abstract

In contrast to the evidence from other countries, Swedish studies of the transition from unemployment to employment have consistently reported a nonnegative duration dependence in the hazard. This study examines the extent to which this results from large scale labor market programs, a limited duration of unemployment benefits, or differences among available jobs. The labor market programs are here found to be the primary factor behind the earlier Swedish results. The programs thus pick up those with the worst employment prospects, thereby postponing a decrease in the reemployment probability among job searchers. This in turn generates an on 'average' constant duration dependence. Copyright 1995 by The London School of Economics and Political Science.