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Working for 200 Euro? The Unintended Effects of Traineeship Reform on Youth Labor Market Outcomes

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  • Iva Tomić
  • Ivan Zilic

Abstract

This paper evaluates the effects of an active labor market policy (ALMP) reform, the so‐called SOR measure (vocational training for work without commencing employment), on youth labor market outcomes in the newest EU member state—Croatia. In 2012, SOR was redesigned to ease the first labor market entry and promote on‐the‐job training, enabling a young person without relevant work experience to get a one‐year contract and a net monthly remuneration of 210 euro, while after 2014, the measure also became a part of the European Youth Guarantee. Pooling Croatian Labor Force Surveys from 2007 to 2016 and using the difference‐in‐difference strategy, we estimate the causal intent‐to‐treat effect of the program reform on labor market outcomes. The main results indicate that the reform has had, at best, neutral effects on employment and unemployment, while there is evidence that a portion of young individuals was propelled into inactivity. Though expected, adverse effect on wages—both at the mean and at higher percentiles of the wage distribution—is driven mostly by wages received by women and university graduates.

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  • Iva Tomić & Ivan Zilic, 2020. "Working for 200 Euro? The Unintended Effects of Traineeship Reform on Youth Labor Market Outcomes," LABOUR, CEIS, vol. 34(3), pages 347-371, September.
    • Handle: RePEc:bla:labour:v:34:y:2020:i:3:p:347-371
    DOI: 10.1111/labr.12176
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    Cited by:

    1. Massimiliano Bratti & Corinna Ghirelli & Enkelejda Havari & Giulia Santangelo, 2022. "Vocational training for unemployed youth in Latvia," Journal of Population Economics, Springer;European Society for Population Economics, vol. 35(2), pages 677-717, April.
    2. Srhoj Stjepan & Zilic Ivan, 2021. "“Fine...I’ll do it myself”: Lessons from self-employment grants in a long recession period," IZA Journal of Labor Policy, Sciendo & Forschungsinstitut zur Zukunft der Arbeit GmbH (IZA), vol. 11(1), pages 1-32, May.
    3. Jelena Rkman, 2020. "An Estimated Search and Matching Model of the Croatian Labor Market: Post-crisis Analysis," Croatian Economic Survey, The Institute of Economics, Zagreb, vol. 22(2), pages 35-72, December.

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