The response of youth unemployment to benefits, incentives, and sanctions

Abstract The decline in the youth unemployment rate in Denmark is nearly unique among OECD countries and merits study. In 1996, a radical labour market reform was implemented, the Youth Unemployment Programme (YUP), directed towards unemployed, low-educated youth. This paper analyses the effects of the implementation of the YUP. We investigate the duration of unemployment spells and the transition rates from unemployment to schooling and employment. Three effects are analysed: an announcement effect, a direct programme effect, and a sanction effect. We find that the YUP has been partially successful.

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