Lillit Ottosson defends her thesis "From Welfare to Work: Financial Incentives, Active Labor Market Policies, and Integration Programs"

The thesis consists of four stand-alone essays in labor economics. Using data from Sweden, the essays investigate how individuals are affected by active labor market policies and how social benefits are designed. The thesis contributes to our understanding of how policy can be used to improve the labor market situation of groups with weak labor market attachment. The thesis also studies the relationship between central and local governments as providers of these services.

Discussant is Professor Alexander Willén, Norweigan School of Economics and the Grading committee members are Professor Matz Dahlberg, Department of Economics and IBF, Uppsala University, Associate Professor Pär Zetterberg, Department of Government, Uppsala University and Associate Professor Daniela Andrén, School of Buisness, Örebro University.

Advisors are Professor Eva Mörk, Department of Economics, Uppsala University, Associate Professor Anna Sjögren, IFAU and Ph.D. Ulrika Vikman, IFAU.

Abstract 

Essay I: I study the effects of increased social assistance (SA) generosity by exploiting exogenous variation induced by a ruling in the Swedish Supreme Administrative Court in 1993, mandating local governments to provide a minimum level of untied SA payments. The new rule forced some local governments to increase their SA generosity, while others were unaffected as they already complied with the stricter standards. I find that a 1 percent increase in SA generosity caused an increase in SA recipiency by 1.3 percent and a decrease in employment by 0.2 percent, among individuals with a high risk of receiving SA. For individuals who were already recipients of SA, the increase in SA payments was not offset by lower labor earnings, resulting in increased disposable income.

Essay II (with Eva Mörk and Ulrika Vikman): We evaluate a temporary public sector employment program targeted at individuals with weak labor market attachment. Using dynamic inverse probability weighting to account for non-random dynamic assignment into the program, we show that the program is successful in increasing employment and reducing social assistance. The positive employment effect is driven by individuals at a regular workplace; for participants with temporary employment at a constructed workplace, we find negative employment effects. The decrease in social assistance is partially countered by an increase in the share that receive unemployment insurance benefits. This indicates that municipalities are able to shift costs from the local to the central budget.

Essay III (with Cristina Bratu and Linna Martén): This paper studies a 2010 reform in Sweden that transferred responsibility for a refugee integration program from municipalities to the Public Employment Service (PES). Aiming to increase female participation in the program, the reform strengthened economic incentives for the secondary earner in the household to participate. We show that the program improved women's earnings and employment, and that these effects emerge 2–3 years after program participation. The strengthened economic incentives increased participation in the program for women, but this does not drive the labor market effects. Instead, the increased labor market focus brought on by transferring the program to the PES seems to be the main mechanism behind our findings.

Essay IV (with Ulrika Vikman): In this paper, we evaluate an active labor market program (ALMP) targeted toward immigrants with very limited language skills. The program combines support in the participant's native language with an ALMP in a regular workplace. We apply dynamic inverse probability weighting to account for dynamic selection and compare participants with observably similar non-participants. We find a positive 10 percentage point employment effect, mainly explained by the participants obtaining subsidized employment as part of the program. In the medium term, these positive effects disappear. Participation in the program also leads to improved Swedish language skills.

Download the thesis from Diva here

Read more about Lillit on her web page