Benefits or Work? Social Programs and Labor Supply

Abstract: This thesis consists of four self-contained essays.Essay I: This essay evaluates how access to paid parental leave affects labor market entrance for immigrating mothers with small children. Paid parental leave together with job protection may increase labor force participation among women but if it is too generous it may create incentives to stay out of the labor force. This incentive effect may be especially true for mothers immigrating to a country where having small children automatically makes the mothers eligible for the benefit.To evaluate the differences in the assimilation process for those who have access to the parental leave benefit and those who do not, Swedish administration data is used in a difference-in-differences specification to control for both time in the country and the age of the youngest child.The results show that labor market entrance is delayed for mothers and that they are less likely to be a part of the labor force for up to seven years after their residence permit if they had access to parental leave benefits when they came to Sweden.  This reduction in the labor force participation is to some extent driven by unemployment since the effect on employment is smaller. But there is still an effect on employment of  3 percentage points lower participation rates 2-6 years after immigration.Essay II: This essay examines if the probability of leaving unemployment changes for unemployed parents with young children when childcare is available. To investigate this, I use the heterogeneity among Swedish municipalities before the implementation of a 2001 Swedish childcare reform making it mandatory for municipalities to offer childcare to unemployed parents for at least 15 hours per week. The results indicate a positive effect on the probability of leaving unemployment for mothers when childcare is available, but no effect is found for fathers. For mothers, some heterogeneous effects are also found, with a greater effect on the probability of leaving unemployment for work when childcare is available for mothers with only compulsory schooling or university education and mothers with two children.Essay III (with Helge Bennmarker and Oskar Nordström Skans): In this essay we estimate the effects of conditioning benefits on program participation among older long-term unemployed workers. We exploit a Swedish reform which reduced UI duration from 90 to 60 weeks for a group of older unemployed workers in a setting where workers who exhausted their benefits received unchanged transfers if they agreed to participate in a work practice program. Our results show that job finding increased as a result of the shorter duration of passive benefits. The time profile of the job-finding effects suggests that the effects are due to deterrence effects during the program-entry phase. We find no evidence of wage reductions, suggesting that the increased job-finding rate was driven by increased search intensity rather than lower reservation wages.Essay IV (with Anna Persson): Previous literature shows that activation requirements for welfare participants reduce welfare participation. However, the dynamics have not been fully examined. In this essay we use a rich set of register data covering the entire population in a Swedish municipality to study how the introduction of mandatory activation programs aimed at unemployed welfare participants affect the probability of entering and exiting welfare. Our results indicate that the reduction in the caseload of welfare participants was mainly due to an increase in welfare exits. The effect is larger for unmarried individuals without children and for young individuals where we also find a reduction in welfare entries. It thus seems that individuals with fewer family responsibilities are more responsive to the reform.