This report examines the performance of the Public Employment Service (PES) and the effectiveness of activation strategies in Norway. It covers the role of the key actors in labour market policies, the placement function of the PES, the structure of benefits for the working-age population out of work and the related incentives and disincentives for taking up work, and provides an overview of the different active labour market programmes. Over the past few years, labour market conditions in Norway have been better than in most OECD countries, reflecting strong economic and productivity growth. The global financial and economic crisis and the significant decline in oil and gas prices observed since the second half of 2008 are affecting the short-term economic prospect, with some deterioration in labour market conditions. Despite its relatively strong labour market performance, the main challenge for Norway is to mobilise underutilised labour, as nearly a fifth of the working-age population is out of work and receiving health-related benefits. In contrast, the take-up of unemployment benefits has been limited despite their generosity – both in terms of duration and net replacement rates – by strict eligibility criteria and the implementation of mobility and other mutual obligation requirements in Norway. The Norwegian Government has put forward several major policy reforms to contain benefit dependency and to prevent people from leaving the labour market too early or on a long-term or permanent basis. In 2006, a new institution – NAV – was launched, merging the State PES and the National Insurance Administration, and bringing them together in front-line offices with municipal services providing coordinated services for all clients. Several other changes to activation strategies are also underway. The new NAV employment services are systematising their early intervention and follow-up strategies for all jobseekers. Greater incentives have also been built into labour market programmes in particularly for social assistance clients. In spite of these important reforms, there remain a number of challenges to counteract sickness absence. It is now widely recognised that long-term sick leave is the initial step to disability benefit in many OECD countries. Early intervention in the form of case-by-case monitoring of sickness absence in Norway – which requires collaboration between employees, employers and NAV – has so far not been successful in delivering the desired outcomes. Finally, vocationally disabled people represent the largest group of participants in labour market programmes. Half of them engage in lengthy retraining in mainstream education and training courses. But further efforts have to be made to tailor active programmes to the needs of this group as well as other jobseekers such as older workers and immigrants.