Article

Flexicurity: Labour Market Performance in Denmark

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Abstract

Unemployment is at a low and stable level in Denmark. This achievement is often attributed to the so-called flexicurity model combining flexible hiring and firing rules for employers with income security for employees. Whatever virtues this model may have, a low and stable unemployment rate is not automatically among them since the basic flexicurity properties were also in place during the 1970s and 1980s where high and persistent unemployment was prevalent. Labour market performance has changed due to a series of reforms during the 1990s, the main thrust of which was a shift from a passive focus of labour market policies to a more active focus on job search and employment. The policy tightened eligibility for unemployment benefits and their duration as well as introduced workfare elements into unemployment insurance and social policies in general. Thereby, policy makers attempted to strengthen the incentive structure without taking resort to general benefit reductions. We argue that the workfare policies have played an important role running primarily via motivation/threat and wage effects. However, active labour market policies are resource demanding, and although the workfare reforms have improved cost effectiveness, there is still an issue as to whether the resources going into active labour market policies are used efficiently. (JEL codes: J30, J40, J60, H53)

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... Den danske arbeidsmarknadsmodellen består av tre hovudelement: (i) svakt stillingsvern, (ii) forholdsvis generøs arbeidsløysetrygd, og (iii) utstrakt bruk av arbeidsretta tiltak (van Kersbergen & Hemerijck 2012; Heyes 2011). Sidan arbeidsmarknaden er organisert på denne måten, er Danmark også karakterisert ved ei høg grad av inn-og utflyt blant jobbstillingar og arbeidstakarar (Madsen 2004;Andersen & Svarer 2007). Altså, arbeidarar både mistar og får ny jobb i eit forholdsvis hyppig tempo, i alle fall samanlikna med dei skandinaviske nabolanda. ...
... Den danske modellen lukkast betre når det gjeld sannsyn for tilsetjingar for folk med helseproblem. Det er verdt å merke seg at to viktige prosessar bidrar til dette: (i) ei større inn-og utfly på arbeidsmarknaden totalt i Danmark (Madsen 2004;Andersen & Svarer 2007) samt (ii) eit forholdsvis stort sannsyn for å vere arbeidssøkande blant folk med helsetrøbbel. Resultata tyder uansett på at den norske modellen har utfordringar på dette punktet, sidan folk med dårleg helse tilsynelatande har vanskar med å få innpass (samanlikna med Danmark). ...
Article
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Denne studien undersøker arbeidsmarknadstilknytinga til personar med helseproblem i Danmark og Noreg i ein periode med låg etterspurnad etter arbeidskraft. Noreg og Danmark deler mange karakteristikkar, men stillingsvernet er vesentleg svakare i den danske «flexicurity»-modellen. Dette kan vere gunstig for personar med dårleg helse, fordi det er mindre risiko for arbeidsgjevar ved å tilsetta nokon med eit negativt signal (dårleg helse, for eksempel) når det er enkelt å seie opp arbeidstakaren dersom han/ho ikkje er produktiv nok. Resultata indikerer at folk med helseproblem i Danmark har litt større sannsyn for å bli tilsett, og ganske markant større sannsyn for å vere arbeidsledig, enn personar med god helse i løpet av observasjonsvindauget (2008–2011). I tillegg er det meir utbreitt med midlertidig stillingskontrakt blant dei med dårleg helse i Danmark. Folk med helseproblem i Noreg derimot, skil seg ikkje særleg frå personar med god helse. Dette tyder på at eit svakt stillingsvern sannsynlegvis ikkje er vegen å gå for å sikra høg sysselsetting blant folk med dårleg helse. Nøkkelord: arbeidsløyse,tilsetjing,helse,stillingsvern,økonomisk nedgangstid
... The Danish 'flexicurity' labour market model consists of three main parts: (i) minimal job protection, (ii) generous unemployment benefits, and (iii) extensive use of active labour market policies (Heyes 2011;van Kersbergen and Hemerijck 2012). Accordingly, there is a high level of worker-and job turnover rate, made possible by the lenient hiring and firing legislation (Madsen 2004;Andersen and Svarer 2007). It is especially among skilled and unskilled workers that the employment protection is weak, while employers have less flexibility in dismissing traditional 'white collar' employees (Jensen 2011). ...
... Fourthly, because of cross-national differences in mobility rates. The comparatively high hiring probabilities for people with ill health and high education in Denmark are most likely a result of two important processes: First, a higher worker turnover rate overall in the Danish labour market (Madsen 2004;Andersen and Svarer 2007), and second, a high unemployment risk for people with ill health in Denmark during the recent economic downturn (Heggebø 2015). This means that people with health problems are in the 'pool' of potential candidates for a job opening to a large extent, and this could account for some of the crossnational differences in hiring likelihood. ...
Article
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Previous research has shown that people with health problems often experience disadvantages on the labour market. Can weak employment protection increase employment prospects for people with ill health? In order to investigate this question, the longitudinal part of the European Union Statistics on Income and Living Conditions (EU-SILC) data material is utilised (2008–2011) and generalised least squares regressions are estimated. The research context is set to Scandinavia. Denmark, Norway, and Sweden are similar in many respects, but deviate on one important point: the employment protection legislation is considerably weaker in the Danish ‘flexicurity’ model. The lenient firing regulations could make employers more prone to take the ‘risk’ associated with hiring someone with a health problem, since the costs related to firing him/her are low. The results reveal that people with ill health have somewhat better hiring likelihood in Denmark than in Norway and Sweden. This pattern is, however, only evident among higher educated individuals. Furthermore, descriptive evidence indicates that the ‘flexicurity’ model seems to come at a cost for people with health problems: The employment rates are not high overall, and temporary work contracts are much more widespread in Denmark. Consequently, labour market attachment for people with ill health remains rather ‘loose’ in the Danish ‘flexicurity’ model.
... For an average production worker, the replacement rate is less than 50% (see Andersen et al. (2020)). A string of reforms changed labor market policies in the mid-1990s (see Andersen and Svarer (2007)). Roulet (2021) finds a similar impact of job displacement using plant closure as the displacement event. ...
... Passive and active labor market policies. Andersen and Svarer (2007) argue that that active labour programs are key for a high-performing labor market. Card et al. (2018) examine the impact of 207 ALMP studies, and find a long run (2+ years) impact on employment probability of between 5 and 12 percentage points. ...
... For an average production worker, the replacement rate is less than 50% (see Andersen et al. (2020)). A string of reforms changed labor market policies in the mid-1990s (see Andersen and Svarer (2007)). Roulet (2021) finds a similar impact of job displacement using plant closure as the displacement event. ...
... Passive and active labor market policies. Andersen and Svarer (2007) argue that that active labour programs are key for a high-performing labor market. Card et al. (2018) examine the impact of 207 ALMP studies, and find a long run (2+ years) impact on employment probability of between 5 and 12 percentage points. ...
Preprint
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We document the consequences of losing a job across countries using a harmonized research design. Workers in Denmark and Sweden experience the lowest earnings declines following job displacement, while workers in Italy, Spain, and Portugal experience losses three times as high. French and Austrian workers face earnings losses somewhere in-between. Key to these differences is that Southern European workers are less likely to find employment following displacement. Loss of employer-specific wage premiums accounts for 40% to 95% of within-country wage declines. The use of active labor market policies predicts a significant portion of the crosscountry heterogeneity in earnings losses. JEL Classification: J30, J63, J64
... Danish policy is oriented toward providing a generous social security system offering permissive and longlasting unemployment benefits. This is accompanied by active labor market policies aiming to bring unemployed persons into employment by means of incentives and support schemes ( Plougmann and Madsen 2002;Andersen and Svarer 2006;Andersen and Svarer 2007). ...
... Though the level of individual mobility of workers between jobs as well as the job turnover (job creation and destruction) is relatively high, Denmark represents a coordinated market economy with agreements between trade unions and employers as the main regulatory mechanism ( Plougmann and Madsen 2002;Andersen and Svarer 2007;Eriksson and WestergaardNielsen 2008). Moreover, Denmark is considered to be an occupational labor market system because its education and training system (see the following section) is oriented toward the provision of skills that meet the demand of the labor market. ...
... The similarity between the Danish and the American reforms, 15 in the absence of empirical evidence, generated a controversial debate about the transformation of the traditional Scandinavian model. The debate developed between those who believed that activation policy would generate a decline of social citizenship (Torfi ng 1999) and those who believed that activation policies are in continuity with previous labour market policies designed to foster an active society (Halvorsen and Jensen 2004;Andersen and Svarer 2007). From our perspective, the continuity proposed by the Danish reform is clear and constitutes an interesting case to explore the relation between labour market and social capital. ...
... If the word 'activation' is a new term, the idea to create a system of 'fl exicurity' is not new in Denmark and other Scandinavian countries (Andersen and Svarer 2007). Flexicurity is a system of labour regulations that entitles, on the one hand, companies to be fl exible to hire and dismiss easily, and on the other hand entitles citizens to generous compensations and opportunities for training when this occurs. ...
Article
'The quantitative survey of social capital at the regional level is an original contribution that opens a fresh geographic perspective on the literature in this field. Moving beyond the statistical representation of regional patterns the author's use of case studies illuminates how local culture and historical contexts influence the manifestations of social capital. This volume breaks new ground challenging conventional analysis to advance our understanding of social capital.' - Neil Gilbert, University of California, Berkeley, US.
... The key ingredients are lax employment protection legislation, a relatively generous social safety net, and active labor market policies. This model combines employers' demand for flexibility with workers' demand for income security, and maintains work incentives via the active labor market policy [1]. However, the flexicurity model is no guarantee against a recession, and the question is whether the model can cope with a large negative shock, remain flexible, and avoid persistent unemployment. ...
... The Danish flexicurity labor market has received considerable attention in recent years, especially for its ability to make a relatively generous social safety net compatible with a high employment rate [1]. The Great Recession brought the model a serious test. ...
... Furthermore, these countries have traditionally been associated with segmented labour markets, with a large secondary segment characterised by lower salaries and poorer conditions related to job security, working hours and career prospects (Simón et al., 20142014). On the contrary, Denmark, frequently stressed as a good example of flexicurity and less segmented labour market (Andersen & Svarer, 2007), shows the highest job quality. Despite that, the lowest differences between immigrants and natives are observed in the United Kingdom and France, countries with a longer migratory tradition. ...
Article
Using microdata from the European Union Labour Force Survey (EU‐LFS) and aggregate indicators of labour market institutions, this article compares the job quality of native and non‐native workers across European countries and analyses the impact of the institutional settings on the job quality differential between both groups. The LFS is used to measure a job quality index for the period 2005–2017. We find that some immigrant groups fare worse than natives, the contribution of the “composition effect” to explain this differential is large, and the institutional framework affects the immigration gap in job quality. In particular, some labour market institutions (more centralized wage bargaining, stricter employment protection legislation) tend to be detrimental for immigrants relative to natives, while integration policies seem to work well in reducing these differences.
... Decoupling health insurance from employment would increase labor flexibility and reduce fears of losing adequate health insurance and other important benefits that may be attached to employment. In Denmark, generous welfare systems are combined with weak job security mandates, sometimes called "flexicurity" (Andersen and Svarer 2007). This situation can be contrasted with the situation in Sweden, where somebody who voluntarily gives up a tenured position for self-employment may not have any more security than that provided by (means-tested) social welfare. ...
Chapter
This paper examines policy measures that foster the creation of innovations with high inherent potential and that simultaneously provide the right incentives for individuals to create and expand firms that disseminate such innovations in the form of highly valued products. In so doing, we suggest an innovation policy framework based on two pillars: (i) the accumulation, investment, and upgrading of knowledge and (ii) the implementation of mechanisms that enable knowledge to be exploited such that growth and societal prosperity are encouraged. Knowledge is a necessary but far from sufficient condition for growth. To secure industrial dynamics and growth in the long term, institutions must be designed both to encourage sophisticated knowledge investments and to stimulate the creation, diffusion and productive use of knowledge in all sectors of the economy. We argue that the latter area has been overlooked in the policy discussion and that a coherent innovation policy framework must include tax policy, labor market regulation, savings channeling, competition policy, housing market regulation, and infrastructure to foster growth and future prosperity.
... Denmark is often highlighted as the prime example of a particular mix of a flexible labour market with a generous social security system. However, Andersen and Svarer (2007) have noted that, even here, staying out of the labour force for more than a year decreases men's and women's chances in the job market. This leads us to believe that in a situation where the interplay between generations, societal and familial, has been seemingly solved gender issues are irrelevant. ...
Chapter
We start by comparing the childcare systems in the 11 European cities, looking particularly at whether the childcare provision in these cities follows national provision levels or not. We then focus on analyzing the relationships between local and national childcare policies in four European cities: Bologna (Italy) and Terrassa (Spain) from Southern Europe, and Jyväskylä (Finland) and Aalborg (Denmark) from the Nordic countries. The availability and use of childcare services are analyzed, as are other factors influencing the possibilities and obstacles of labour market participation for mothers with young children. The aim of this analysis is to demonstrate the significance of local welfare systems in their socio-cultural context and to understand the scope that local authorities have to draft local policies and thus to divert from national policy definitions. Local policy making also brings rigid welfare regime categories into question.
... Während Länder wie Dänemark, Schweden oder die Niederlande alsbald arbeitsmarktpolitische Instrumente gefunden haben, um -auch für die Geringqualifizierten -zur Vollbeschäftigung zurückzukehren (vgl. beispielsweise Andersen und Svarer (2007) für Dänemark und Nickell und van Ours (2000) für die Niederlande), ist Deutschland mit den Hartz-Gesetzen vergleichsweise spät auf diese Spur eingebogen. ...
... Denmark and other countries studied in prior literature, in particular the United States, differ in their judicial and labor market institutions. But the paper's findings of significant impacts of displacement on crime in a country with 6 relatively high unemployment benefits (Andersen & Svarer 2007) and lower crime rates (Lavrsen & Pedersen 2013) suggest that the paper's results are a lower bound of the impact of job displacement on crime. Finally, the paper presents novel results that document costs of incarceration above and beyond the direct costs of incarceration and parole supervision. ...
... For an average production worker, the replacement rate is less than 50% (see Andersen et al. (2020)). A string of reforms changed labor market policies in the mid-1990s (see Andersen and Svarer (2007)). ...
Article
Full-text available
We document the consequences of losing a job across countries using a harmonized research design applied to seven matched employer-employee datasets. Workers in Denmark and Sweden experience the lowest earnings declines following job displacement, while workers in Italy, Spain, and Portugal experience losses three times as high. French and Austrian workers face earnings losses somewhere in between. Key to these differences is that Southern European workers are less likely to find employment following displacement. Loss of employer-specific wage premiums explains a substantial portion of wage losses in all countries.
... National governments may reduce their efforts and costs to endow local employment offices. Yet, investments into job market matching, active policies, and incentivization can be highly effective, as is visible from country experiences (Andersen and Svarer 2007). 22 A strategy to reduce moral hazard problems is to implement a system such as the IV system described in Section 3. Here, an unemployment-producing policy may trigger transfers, but on a temporary basis only. ...
Article
There is a large, yet growing debate about the need to complement the European monetary union with a stronger fiscal union. This article reviews the potential trade-offs between effectiveness, moral hazard problems, and permanent redistribution. Addressing the counter-arguments against a tighter fiscal union is essential to overcome the political reluctance in some member states that are concerned about large amounts of redistribution. We discuss clawback mechanisms that have been suggested in the literature as a measure to limit redistribution, but conclude that clawbacks are undesirable, as they would essentially destroy the insurance value of a fiscal union. Instead, we propose that a clearly defined exit option as a guarantee against involuntary redistribution can make entry into a stronger fiscal union less risky and hence more attractive for member states.
... Part of this public spending is dedicated to providing Danish unemployed workers with a generous social safety net. But, the entire system is premised on the idea that unemployment can be kept low by improving employers' ability to train employees well (Pedersen et al 2007;Lewchuk 2010;Andersen and Svarer 2007). The question remains as to whether the system would be able to maintain the social safety net at its current levels if the unemployment rates were to rise. ...
Article
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The labour market in Canada is changing. Over the past decades there has been an increase in the number of precarious workers on short-term, part-time, contracts; jobs are created and lost, as employers deem necessary. As a result of these shifts in the organization of work, many workers are now forced to hold multiple jobs in order to make ends meet. This move away from long-term employment has created a situation where the majority of Canadian workers can no longer expect their employer to provide predictable support and security for them. At the same time, under the current Employment Insurance (EI) laws, they cannot expect support from the federal government either. How can workers gain some immediate protection through expanded social welfare programmes? With more and more workers, especially women, racialized workers and lower income people relegated to precarious employment, we must question current social policy. If, as it appears, EI does not work, we must strive to implement a viable alternative. Could an alternative system be modeled on the flexicurity system now in effect in Denmark? This paper draws on Nancy Fraser’s criteria for social justice for the globalized worker, to assess the ways that flexicurity could improve the security of the Canadian worker by offering alternatives to participation in the market nexus.
... The social safety net served to protect incomes but not to bring the unemployed back into employment, which had dramatic consequences for public finances. The model was implementated in 1998 together with the third facet-active labour market policies, which has a clear focus on job search and employment (Andersen and Svarer 2007b). ...
... Se han utilizado datos del período 2002-2007, para evitar cualquier "contaminación" producida por la actual crisis de empleo. Como puede apreciarse, España tuvo entre 2002 y 2007 la tasa de rotación más alta de los países de su entorno, solamente superada por Dinamarca, pero con la particularidad de que la danesa es una rotación fundamentalmente voluntaria, que obedece a la facilidad para encontrar otro empleo en un mercado altamente dinámico (Andersen y Svarer, 2007 También se puede observar cómo la alta tasa de contratación existente en nuestro país (15%) era más elevada que la de cualquiera de los mercados laborales en comparación. Por último, por lo que se refi ere al porcentaje de contratos fi nalizados, también España se sitúa a la cabeza, concretamente en tercer lugar, solamente superada otra vez por Dinamarca y por Finlandia, que poseen políticas activas que favorecen una rápida recolocación de los trabajadores desempleados. ...
Article
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Resumen El artículo realiza un análisis dinámico para conocer si el mercado laboral español responde a las características de los mercados de trabajo transicionales, desde un enfoque de fl exiguridad. A través de la Muestra Continua de Vidas Laborales se estudian las trayectorias de los trabajadores españoles durante el período 2007-2010, que abarca el fi nal de la expansión de la economía española y el comienzo de la actual crisis de empleo. De la conjunción del tema elegido, el en-foque y la base de datos utilizada, resulta una perspectiva novedosa en nuestro país. Se ofrece evidencia empírica de la evolución de los episodios de empleo y paro, del grado de rotación del mercado laboral español y de las difi cultades de determinados colectivos para realizar tran-siciones en y hacia el empleo. Los resultados muestran un mercado de trabajo en el que a) las transiciones se encuentran bloqueadas, y b) existe una alta inseguridad laboral. Palabras clave: fl exiguridad; transiciones laborales; empleo; muestra continua de vidas laborales; mercados de trabajo transicionales.
... De regulerende rol van de staat blijft echter bestaan, waardoor de overheid een belangrijke rol blijft spelen op deze beleidsterreinen. Andresen en Svarer 2007 190. ...
... Denmark is usually put forward as the prime example of the much-heralded flexicurity model, which combines flexible hiring and firing rules with generous unemployment benefits. However, it is difficult to attribute the relatively low unemployment rate in Denmark since the 1990s to the flexicurity model, since the country experienced much higher unemployment in the 1970s and 1980s with basically the same employment protection legislation (Andersen and Svarer, 2007). In Figure 1, it could be noted that legislation has been somewhat liberalized in some of the groups of OECD countries since the 1980s. ...
Article
'In this book, Per Skedinger gives an excellent and balanced survey and evaluation of both the theoretical prediction and the empirical research about the consequences of legislated employment protection.'
... Renegotiations in January 1989 marked a pivotal change in the manufacturing sector, with sector-specific negotiations between DI (a DA member organization that organizes firms in the manufacturing sector) and CO-metal (a bargaining conglomerate representing unions organizing workers employed in DI firms). These renegotiations shifted a substantial number of wage negotiations to the local level and substantially increased the scope of firm-level wage bargaining (Andersen and Svarer 2007). Although this decentralization process has affected all sectors of the Danish economy in recent decades, both unions and employer organizations in the manufacturing sector initiated this process in 1989. ...
Article
This paper uses administrative data to study the relationship between the decentralization of wage bargaining systems and the costs of worker displacement. Specifically, the paper exploits a major reform of the wage bargaining system in the Danish manufacturing sector, a reform that changed the wage-setting process from a highly centralized bargaining system at the national level to a decentralized system with a strong emphasis on firm-level wage bargaining. The results show that under the centralized wage bargaining system, displaced workers’ income losses were small, whereas under the decentralized wage bargaining system, these income losses increased substantially, particularly because displaced workers experienced worse wage growth under the decentralized system. The effect persists after controlling for a variety of macroeconomic indicators, and displaced workers’ income losses did not increase in sectors that were not affected by a comparable change in the wage bargaining system. (JEL: J01, J63, J65)
... Decoupling health insurance from employment would increase labor fl exibility and reduce fears of losing adequate health insurance and other important benefi ts that may be attached to employment. In Denmark, generous welfare systems are combined with weak job security mandates, sometimes called "fl exicurity" (Andersen and Svarer 2007 ). This situation can be contrasted with the situation in Sweden, where somebody who voluntarily gives up a tenured position for self-employment may not have any more security than that provided by (means-tested) social welfare. ...
Chapter
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Innovation is increasingly considered the key to elevating prosperity and securing sustainable long-term growth. The last few decades have also witnessed a refi nement of previous growth models to include investments in education by individuals and R&D by fi rms. Better educated individuals and increased expenditure on R&D are shown to result in increased innovation and accelerated growth in endogenous growth models. This fi nding has spurred policy makers, most recently the OECD, the European commission, and other organizations, to design innovation strategies to meet future growth and welfare challenges. Such strategies have also trickled down to the country level.
... Due to stringent EPL rules, it may be more expensive to hire and retain older workers. In the face of generous employment benefits, "insider" older workers may avoid changing employers, with the consequence Andersen and Svarer (2007). ...
Article
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In the past decade, European governments have implemented activating policy reforms to maximize older workers’ employment and employability, representing a paradigmatic change in approaches to work and retirement. This study isolates the factors that explain the relative success and failure of competitive frames that are either in favor of or against activating policies in European news coverage, by applying time-series analysis (ordinary least squares with panel-corrected standard errors) to monthly aggregated news coverage in the Netherlands, the United Kingdom, Denmark, and Spain over the timespan 2006–2013. The results show that pro-activating and counteractivating frames generally coincide in competitive framing environments. The pro-activating frame proliferated in times of high employment protection, whereas the counteractivating frame prevailed stronger in conservative compared with progressive newspapers, and gained momentum during the aftermath of the financial crisis and in times governments on the economic left were in power. The study advances knowledge of competitive issue framing by demonstrating how the economic, policy, and political context matters for the emergence and evolvement of competing frames. In addition, the findings contribute to the understanding of the factors that contribute to news representations that promote active aging in European news, which may foster support for policy reforms that sustain older workers’ employability.
... Denmark has been one of the pioneering countries in implementing such policies, and is often deemed a 'success case.' 149 However, the low and stable unemployment rate in Denmark cannot be fully understood without considering its active labour market policies (ALMPs). 150 ALMPs refer to a broad set of policies that aim to help the unemployed return to work: 151 ...
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While the health of Europeans has improved over recent years, differences by gender, birthplace, and/or socioeconomic background persist. This report maps the extent of such health inequalities, its determinants, and costs to society. The findings indicate that differences in health between and within countries are attributable not only to social and health policies, but also depend on economic policy and the social determinants of health. Thus, holistic policy interventions are required to tackle health inequalities.
... Furthermore, to receive unemployment benefits the participant had to be actively seeking a new job, that is, being available for the labor market (the so-called ''right and duty principle''). 32 If a full-time employed participant had quit the job him/herself, he or she would not be able to collect unemployment benefits until after a mandatory waiting period of 3 weeks. Still, in some cases, this waiting period was not applied, for example, if the job has been quit due to health problems. ...
Article
Objectives: To investigate the association between workplace bullying and change of job/unemployment, and to investigate whether psychological stress reactions constitute a potential pathway linking workplace bullying and change of job/unemployment. Methods: We used questionnaire data on workplace bullying and psychological stress reactions and register data on change of job/unemployment. We applied a multiple pathway approach to estimate the proportion of the association between workplace bullying and subsequent change of job/unemployment that was potentially mediated by psychological stress reactions. Results: Workplace bullying was associated with risk of change of job (odds ratio [OR] = 1.35; 95% confidence interval [CI]: 1.06-1.72; 24% potentially mediated by psychological stress reactions) and unemployment (OR = 4.90; 95% CI: 3.18-7.55; 19% potentially mediated by psychological stress reactions). Conclusion: Workplace bullying has important consequences for labor market outcomes. Psychological stress reactions may play a vital role in this process.
... It must reduce segmented labor markets and precarious jobs, and promote sustained integration and accumulation of skills' (Commission of the European Communities, 2007). In every EU Member State, due of various political and socio-economic systems, the ways of implementing are different and thus so are the results, however the European Commission set out common principles of Europe- an model of fl exicurity and encourages the Member States to use them 1 . These include among others: 1. Reinforcing the implementation of the EU strategy for growth and jobs and strengthening the European social model. ...
Chapter
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This article attempts to explain the sources and main objectives of the concept of fl exicurity, its implementation in selected EU Member States and the evaluation of the solutions’ effectiveness with particular emphasis on the years of crisis, i.e. 2007-2013. The solutions proposed by the model of fl exible employment and social security seem interesting, especially in times of crisis and economic slowdown.
... The differences in transition regimes across the three countries mainly appear in the linkage between the educational system and the labour market. Denmark has a long tradition of apprenticeship in the vocational upper secondary education, and a more liberal employment legislation which intends to promote a high job-tojob mobility and flows in and out of employment and unemployment according to the so-called 'flexicurity model' which combines flexibility on the labour market and income security for the citizen (Andersen & Svarer, 2007). Finland and Sweden have school-based vocational education and more rigid employment protection legislation (Bäckman et al., 2015;Helms Jørgensen et al., 2019). ...
Article
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Previous research suggests that young adults from out-of-home care (OHC) are at high risk of low education and unemployment. However, there are no studies on their risk of long-term NEET (Not in Employment, Education or Training). This study compared the risk of NEET at age 21-23 among OHC youth across Denmark, Finland and Sweden, using register data for an entire birth cohort born in 1987. The Nordic countries share many features, but there are differences in the provision of after-care support and in the linkage between the educational system and the labour market. The results show that about a fourth in Denmark and Sweden and a third in Finland were NEET, suggesting that the welfare systems were not able to compensate for the OHC youth's childhood disadvantages. To a significant extent , the excess risk of NEET was attributed to poor school performance. Implications for research, policy and practice are discussed.
... The case of the Dutch economy-where tax breaks introduced about a decade ago led to a steep increase in solo self-employment without facilitating radically innovative, high-growth entrepreneurship-illustrates that some marginal changes would not be sufficient (Liebregts 2016). Similarly, Denmark's flexicurity model, which combines generous welfare systems with weak job security mandates (see Andersen and Svarer 2007), has also not been particularly successful in boosting high-tech entrepreneurship. ...
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Research into the link between national institutions and entrepreneurship is characterized by three shortcomings: First, clear-cut concepts of institutions are rare. Second, a parsimonious understanding of how a few core institutions influence entrepreneurship is missing. Third, scholars often ignore that incrementally innovative ventures constitute a distinct (and under-researched) type of entrepreneurship next to the (over-researched) form of radically innovative, high-growth or high-tech entrepreneurship. By addressing these three shortcomings, the Varieties-of-Capitalism (VoC) literature can explain how a core group of distinct national institutions facilitate the development of different types of entrepreneurship between countries. In particular, the VoC framework illustrates the comparative institutional advantage that continental European economies offer to incrementally innovative ventures. Applications of the VoC reasoning to entrepreneurship studies would thus allow researchers to, first, perform focused rather than eclectic analyses of institutional influences on entrepreneurship. Second, it would pave the way for research into institutionally induced equifinality. Third, entrepreneurship research could move away from its wishful ideology displaying radically innovative entrepreneurship as the most desirable form of entrepreneurship. As a consequence, policymakers could target entrepreneurial support measures more specifically to their economy’s institutional environment.
... Thus far, a number of studies were undertaken to depict the adverse and beneficial consequences of flexicurity policies, particularly on productivity and labour market outcomes (unemployment levels). Some of these studies concurred that selected flexicurity measures increased labour and total factor productivity (Laporšek & Dolenc, 2011;Dolenc & Laporšek, 2013;Muffels & Wilthagen, 2013;Rotar, 2017), while others challenge the flexicurity coordinates as being the main contributors to labour market performance (Andersen & Svarer, 2007). Yet others concluded that flexicurity reforms spur job creation and can substantially reduce unemployment in countries where severance payments are initially high (Kettemann et al., 2017). ...
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... Decoupling health insurance from employment would increase labor fl exibility and reduce fears of losing adequate health insurance and other important benefi ts that may be attached to employment. In Denmark, generous welfare systems are combined with weak job security mandates, sometimes called "fl exicurity" (Andersen and Svarer 2007 ). This situation can be contrasted with the situation in Sweden, where somebody who voluntarily gives up a tenured position for self-employment may not have any more security than that provided by (means-tested) social welfare. ...
... The Danish labour market can be characterised as a 'flexi-curity' system with a high transition between employment and unemployment, but a welfare system with easy access to social benefits. 38 The risk of LTSA may differ according to different labour market systems of different countries and may limit the external validity to countries with a comparable degree of social security as the present study. ...
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... The Danish flexicurity system is a good example. Andersen and Svarer (2007) point out that the relatively low unemployment rate in Denmark since mid-1990 is due to a labor market reform which complements pre-existing low employment protection and generous unemployment benefits with a newly introduced active labor market policy. Caused by this reform, labor is allocated more efficiently through the combination of low employment protection, a suitable safety net (high replacement rates) and adequate activation measures to avoid the loss of job-specific networks and human capital. ...
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The paper analyses the relationship of tax compliance costs and business strategy. Due to instruments, like information technology, simplified cash accounting or outsourcing compliance activities to tax advisers, private businesses have a set of strategies to optimize their tax compliance cost burden. Under the assumption of rational choice a private business should choose a cost-optimal administration strategy. In spite of that we find empirical evidence for small German businesses using only insufficiently the support of external tax advisers. Therefore, a considerable number of small businesses in Germany could reduce their compliance cost burden by a higher degree of outsourcing tax processes. In contrast, we find no significant evidence for a cost reduction by an electronic data interchange with the tax and social insurance authorities or by a simplified cash accounting method for tax purposes. --
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The aim of this paper is to analyse the role of unobserved heterogeneity in structural discrete choice models of labour supply for the evaluation of tax-reforms. Within this framework, unobserved heterogeneity has been estimated either parametrically or nonparametrically through random co- efficient models. Nevertheless, the estimation of such models by means of standard, gradient-based methods is often difficult, in particular if the number of random parameters is high. Given the relative big set of pa- rameters that enter in labour supply models, many researchers have to reduce the role of unobserved heterogeneity by specifying only a small set of random coefficients. However, this simplification affects the estimated labour supply elasticities, which then might hardly change when unob- served heterogeneity is considered in the model. In this paper, we present a new estimation method based on an EM algorithm that allows us to fully consider the effect of unobserved heterogeneity nonparametrically. Results show that labour supply elasticities do change significantly when the full set of coefficients is assumed to be random. Moreover, we analyse the behavioural effects of the introduction of a working-tax credit scheme in the Italian tax-benefit system and show that the magnitude of labour supply reactions and post-reform income distribution do change signifi- cantly when unobserved heterogeneity is fully considered.
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The paper investigates the nexus between labor and financial markets, focusing on the interaction between labor union behavior in setting wages, firms' investment strategy and asset prices. The way unions set wage claims after observing firm's financial performance increases the volatility of firms' returns and the riskiness of corporate ownership. To remunerate this higher volatility and stronger risk, firms' equities have to grant high return. This mechanism is able to offer an explanation of for the "equity puzzle", that is it can explain the difference between equity returns and the risk free rate. It is a welcome result that the simulated excess return is about the empirical estimate and this result is obtained with a logarithmic specification of the shareholders preferences.
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Corruption in the public sector erodes tax compliance and leads to higher tax evasion. Moreover, corrupt public officials abuse their public power to extort bribes from the private agents. In both types of interaction with the public sector, the private agents are bound to face uncertainty with respect to their disposable incomes. To analyse effects of this uncertainty, a stochastic dynamic growth model with the public sector is examined. It is shown that deterministic excessive red tape and corruption deteriorate the growth potential through income redistribution and public sector inefficiencies. Most importantly, it is demonstrated that the increase in corruption via higher uncertainty exerts adverse effects on capital accumulation, thus leading to lower growth rates.
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The paper analyzes 3 main trends: (t1) The economic development in the Muslim world is slower than in the rest of the world. (t2) The world grows increasingly democratic due to rising incomes, but this trend does not affect the Muslim world. (t3) The world grows increasingly secular due to rising incomes, but this trend is much weaker in the Muslim world. The difference in (t1) is smaller than necessary to explain (t2) and (t3). It is demon-strated that the data contains two economic convergence clubs: The Western club and the Arab one. The non Arab Muslim countries follow the path of other non-Western countries, though at a lower level. Further, it is demonstrated that Muslims deviate as to religiosity, family life values and as to the preference for religion in politics.
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Sanctions or punitive benefits reductions are increasingly used as a tool to enforce compliance of unemployment insurance claimants with search requirements. This article analyses sanctions using a unique administrative data set of individuals who started collecting unemployment insurance in the Netherlands in 1992. After correction for selectivity in the imposition of sanctions, we find that sanctions substantially raise individual re-employment rates. Copyright 2005 Royal Economic Society.
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This article focuses on unemployed individuals' reaction to compulsory labour market programmes prior to participation. In Denmark, after having received UI benefits for a given period of time, continued benefits are made conditional on participation in a labour market programme. I estimate individuals' reaction to compulsory programmes using legislative changes in the duration of benefits period as identification. I find that compulsory programmes do indeed motivate individuals to find employment prior to participation. The effect is large and is even comparable in size to the effect of benefits exhaustion found in studies of American UI systems. Copyright 2006 The Author. Journal compilation Royal Economic Society 2006.
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This study analyzes the effects of right-wing extremism on the well-being of immigrants based on data from the German Socio-Economic Panel (SOEP) for the years 1984 to 2006 merged with state-level information on election outcomes. The results show that the life satisfaction of immigrants is significantly reduced if right-wing extremism in the native population increases. Moreover ; the life satisfaction of highly educated immigrants is affected more strongly than that of low-skilled immigrants. This supports the view that policies aimed at making immigration more attractive to the high-skilled have to include measures that reduce xenophobic attitudes in the native population. --
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The aim of this paper is to analyse the role of unobserved heterogeneity in structural discrete choice models of labour supply for the evaluation of tax-reforms. Within this framework, unobserved heterogeneity has been estimated either parametrically or nonparametrically through random co- efficient models. Nevertheless, the estimation of such models by means of standard, gradient-based methods is often difficult, in particular if the number of random parameters is high. Given the relative big set of pa- rameters that enter in labour supply models, many researchers have to reduce the role of unobserved heterogeneity by specifying only a small set of random coefficients. However, this simplification affects the estimated labour supply elasticities, which then might hardly change when unob- served heterogeneity is considered in the model. In this paper, we present a new estimation method based on an EM algorithm that allows us to fully consider the effect of unobserved heterogeneity nonparametrically. Results show that labour supply elasticities do change significantly when the full set of coefficients is assumed to be random. Moreover, we analyse the behavioural effects of the introduction of a working-tax credit scheme in the Italian tax-benefit system and show that the magnitude of labour supply reactions and post-reform income distribution do change signifi- cantly when unobserved heterogeneity is fully considered.
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This paper examines whether subsidized jobs have contributed to employment in subsidized firms or have merely substituted for non-subsidized ones. The data-set is an unbalanced panel of some 31,000 firms that are followed annually between 1995 and 2002. The analysis is based on difference-in-differences, which is adjusted by regression and matching methods. The results indicate that wage subsidies stimulate employment, and that the magnitude of the effect is as aimed. I also found that subsidies have no sizeable effects on non-subsidized firms of the industry or the geographical area in question. Copyright (c) The London School of Economics and Political Science 2006.
Article
The paper analyses the relationship of tax compliance costs and business strategy. Due to instruments, like information technology, simplified cash accounting or outsourcing compliance activities to tax advisers, private businesses have a set of strategies to optimize their tax compliance cost burden. Under the assumption of rational choice a private business should choose a cost-optimal administration strategy. In spite of that we find empirical evidence for small German businesses using only insufficiently the support of external tax advisers. Therefore, a considerable number of small businesses in Germany could reduce their compliance cost burden by a higher degree of outsourcing tax processes. In contrast, we find no significant evidence for a cost reduction by an electronic data interchange with the tax and social insurance authorities or by a simplified cash accounting method for tax purposes. --
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Economic literature often offers conflicting views on the likely efficiency effects of information exchanges, communication between firms, and market transparency. On the one hand, it is argued that increased information dissemination improves firm planning to the benefit of society (including buyers) and allows potential buyers to make correct decisions given their preferences. On the other hand, economic literature also shows that increased information dissemination can raise prices through tacit or explicit collusion to the benefit of firms but at the expense of society at large. This chapter provides a general analytical framework to reconcile these views and presents some basic conclusions for antitrust practice. In addition, the chapter reviews cases from both sides of the Atlantic where informational issues have played a significant role.
Evaluation of a Danish Experiments of Early Measures for Unemployed
Rosholm (2007). " Evaluation of a Danish Experiments of Early Measures for Unemployed ", Draft.