Can activation programs be considered a ‘magic wand’ that triggers a change of incentives, with little or no costs, and produces real gains in terms of im- proved job-finding rates? The paper reviews ...the liter- ature on the experience of OECD countries with such programs in five areas: strengthening job-search re- quirements, compulsory participation in active labor market programs, stricter monitoring, and imposing sanctions. Programs are judged in terms of duration of unemployment, probability of finding a job, and post-unemployment outcomes such as the level of wages and quality of jobs. Our review finds strong evidence that activation programs can increase the job-finding rates of individuals receiving unemploy- ment or social assistance benefits. At the same time, it cautions that programs may have adverse side effects, ranging from increased exits into inac- tivity to lower quality of post-unemployment jobs, as well as negative indirect effects on the job prospects of non-participants.
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