Wage Effect of a Social Experiment on Intensified Active Labor Market Policies

This paper investigates the effect of intensified ALMPs, by increasing the threat of program participation, on post-unemployment wages. For this purpose, it exploits a social experiment conducted in two Danish counties, where approximately 5,000 unemployed people were randomly selected to receive either a standard treatment or an intensified treatment. It uses a Heckman selection model and finds that an intensified threat of program participation increases the probability of finding a job in the short run, but decreases wages in the same period.