Working Paper 158 - Tackling Graduate Unemployment through Employment Subsidies an Assessment of the SIVP Programme in Tunisia

High unemployment and disillusioned youth lie at the basis of the ‘Arab Spring’ which has recently swept through much of the Middle East and Northern Africa. Despite changes in governments, the root problem has not been solved and political leaders, aware of the delicate and potentially explosive situation, have put the issue high up the policy agenda. This paper evaluates Tunisia’s largest labour market programme, the SIVP: an employment subsidy aimed at university graduates. Using a tracer survey of the 2004 graduating cohort, a range of matching techniques are applied to estimate the effect of the programme on a number of labour market outcomes. Although selection into the programme is not random, we cannot rule out that graduates who benefited from a SIVP have better labour market outcomes than those who did not: they are less likely to be inactive, and less likely to be unemployed – an effect which is particularly strong for graduates at highest risk of being unemployed. The results do indicate, however, that the programme is poorly targeted and hence not very cost-effective. The paper ends with recommendations for re-designing the policy, as well as pointers for future research.