Place-Based Active Labour Market Policies: Demonstrating the Effects of Sweden's Metropolitan Development Initiative

Abstract

Policymakers often struggle with addressing urban pockets of distress, and place-based policies are increasingly discussed as a potential remedy. This article evaluates the impact of such a policy: the Metropolitan Development Initiative implemented by the Swedish government. The initiative included various interventions such as job search assistance, career counseling, and skills development programs, aiming to increase the labor supply of targeted residents—a type of place-based policy that has been scarcely researched. To assess the effects of the initiative, this study employs canonical difference-in-differences, supplemented by interaction-weighted estimators. The analysis focuses on labor participation as the key outcome variable, comparing individuals from targeted neighborhoods to a control group. The findings reveal substantial, significant, and enduring effects on foreign-born males, who on average exhibit a 3.3 percentage point increase in their probability of labor participation, with estimates remaining significant across all post-treatment periods. However, the results for foreign-born females are less definitive.