The Swedish experiences of the 1990s provide a unique example of how large-scale
active labour market programmes (ALMPs) have been used as a means to fight high unemployment.
This paper discusses the mechanisms through which ALMPs affect (un)employment and
surveys the empirical studies of the effects of ALMPs in Sweden. The main conclusions
are: (i) there is hardly any evidence for a positive effect on matching efficiency;
(ii) there are some indications of positive effects on labour force participation;
(iii) subsidised employment seems to cause displacement of regular employment, whereas
this appears not to be the case for labour market training; (iv) it is unclear whether
or not ALMPs raise aggregate wage pressure in the economy; (v) in the 1990s, training
programmes seem not to have enhanced the employment probabilities of participants,
whereas some forms of subsidised employment seem to have had such effects; and (vi)
youth programmes seem to have caused substantial displacement effects at the same
time as the gains for participants appear uncertain.
On the whole, ALMPs have probably reduced open unemployment, but also reduced regular
employment. The overall policy conclusion is that ALMPs of the scale used in Sweden
in the 1990s are not an efficient means of employment policy. To be effective, ALMPs
should be used on a smaller scale. There should be a greater emphasis on holding
down long-term unemployment in general and a smaller emphasis on youth programmes.
ALMPs should not be used as a means to renew unemployment benefit eligibility.