Screening through Activation? Differential Effects of a Youth Activation Program

Abstract

We study the dual role of active labor market policies: First, ALMP may perform a screening role by increasing job-search incentives, especially among individuals with good labor market prospects, already before program participation. Second, actual program participation may help individuals with poor labor market prospects. We examine whether this type of pattern can be found in individual responses to a nationwide youth activation program in Sweden using an RD-design. We find that individuals with a high predicted probability of finding work respond to the threat of activation, whereas there is no effect for individuals with weak labor market prospects.