VERY PRELIMINARY

Abstract: We study individual reactions to a labour market programme targeted at young unemployed in Sweden. The programme, which was introduced in 2007, involved both monetary incentives i.e. changes in the tax/transfer system designed to increase employment, as well as mandatory activation. We use a difference-in-difference strategy to analyse whether there are differences with respect to past health and school drop-out status in the way individuals reacted to the incentives and/or activation associated with the programme. Our hypothesis is that individuals who are in a difficult overall life situation may not be in a position to react to monetary incentives, and may be better helped by actual activation; whereas other individuals may respond to monetary incentives or the threat of activation (in which case activation programmes work more as a screening device). We use register data covering the entire Swedish population, including very detailed information on health