Workfare for the old and long-term unemployed

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 results are due to deterrence during the program-entry phase. We find no impact on ensuing job durations or wages, suggesting that the increased job-finding rate was driven by increased search intensity rather than lower reservation wages. A crude cost-benefit analysis suggests that the reform reduced the combined cost of programs and transfers. (C) 2013 Elsevier B.V. All rights reserved.