Labor market programs in Norway. Do labor market programs improve the job prospects for individuals with reduced working ability? An evaluation.

Abstract

An econometric framework, anchored in the literature, is used to evaluate the effect of Norwegian labor market programs. In Norway, the social benefits can roughly be divided into: unemployment benefits, sickness benefits, work assessment allowance (WAA) and disability pension. Receivers of WAA are individuals that has been declared with reduced working ability because of physical/mental/social issues that makes them unable to work regularly. This thesis will look at how labor market programs are used and how it affects the job prospects for those individuals that have reduced working ability and are receiving WAA. As this is an observational study, the problem of selection bias arises. This is dealt with by using a selection model that allows for analyzing both the selection process into programs and also the employment outcomes after programs. As only one outcome is observed (work or no work), the model estimates the unobserved missing outcome, allowing for the estimation of various treatment effects. Over all the programs and the usage of programs appear successful. The treatment effect on the treated are positive at 5.8 percentage points. The other treatment effects suggests that programs are directed towards people who benefit from program participation rather than towards those who not benefit, in terms of labor market outcome. There is also shown that there is considerably heterogeneity in the response to treatment over different groups. As the former is based on observable characteristics, there is also shown heterogeneity in response to treatment based on unobservable characteristics. Lastly, sub analyses show that, among the most frequently used programs, training (education) appears as the best program, while assistance is in between and work practice performs the worst.