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Social employment of welfare recipients in Belgium: an evaluation

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Author Info

  • Cockx, Bart

    (UNIVERSITE CATHOLIQUE DE LOUVAIN, Institut de Recherches Economiques et Sociales (IRES))

  • Ridder, Geert

    (Vrije Universiteit, Amsterdam)

Abstract

In Belgium welfare agencies are subsidized to employ welfare recipients for a period sufficiently long to entitle them to benefits of the contributory social insurance program. This type of employment is called Social Employment (SE). This paper investigates the effect of SE on the exit rate from welfare. We extend the minimum chi-square approach of Cockx (1995) for grouped duration data to deal with selection into SE at any instant during the welfare spell. Moreover, we introduce a specification error as in Amemiya and Nold (1975) to account for omitted variables, which may be correlated with the selection into SE. We show that a variable that is not correlated with the omitted variables, but affects the probability of selection into SE identifies the SE-effect, and we propose a consistent estimator of this effect that is free of selection bias. We argue that region is such a variable, because in Belgium regional governments determine the subsidy for SE, which affects the participation rate in SE by some political process without consideration of the average characteristics of the welfare recipients in their region. The empirical analysis discovers creaming in the selection process. Without correction for selectivity we find that SE reduces welfare dependency. After correction this conclusion is reversed. These results are in line with the incentives faced by the welfare agencies, that administer the program.

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Bibliographic Info

Paper provided by Université catholique de Louvain, Institut de Recherches Economiques et Sociales (IRES) in its series Discussion Papers (IRES - Institut de Recherches Economiques et Sociales) with number 1996018.

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Length: 28
Date of creation: 01 Jul 1996
Date of revision:
Handle: RePEc:ctl:louvir:1996018

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Keywords: Welfare; evaluation; duration data; grouping;

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References

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  1. Imbens, Guido & van der Klaauw, Wilbert, 1995. "Evaluating the Cost of Conscription in The Netherlands," Journal of Business & Economic Statistics, American Statistical Association, vol. 13(2), pages 207-15, April.
  2. Parks, Richard W., 1980. "On the estimation of multinomial logit models from relative frequency data," Journal of Econometrics, Elsevier, vol. 13(3), pages 293-303, August.
  3. Angrist, Joshua D, 1990. "Lifetime Earnings and the Vietnam Era Draft Lottery: Evidence from Social Security Administrative Records," American Economic Review, American Economic Association, vol. 80(3), pages 313-36, June.
  4. Joshua Angrist & Alan Krueger, 1990. "Does Compulsory School Attendance Affect Schooling and Earnings?," Working Papers 653, Princeton University, Department of Economics, Industrial Relations Section..
  5. Imbens, Guido W & Angrist, Joshua D, 1994. "Identification and Estimation of Local Average Treatment Effects," Econometrica, Econometric Society, vol. 62(2), pages 467-75, March.
  6. LaLonde, Robert J, 1986. "Evaluating the Econometric Evaluations of Training Programs with Experimental Data," American Economic Review, American Economic Association, vol. 76(4), pages 604-20, September.
  7. Alan B. Krueger, 1990. "Workers' Compensation Insurance and the Duration of Workplace Injuries," NBER Working Papers 3253, National Bureau of Economic Research, Inc.
  8. Ridder, G, 1986. "An Event History Approach to the Evaluation of Training, Recruitment and Employment Programmes," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 1(2), pages 109-26, April.
  9. Bruce D. Meyer, 1994. "Natural and Quasi- Experiments in Economics," NBER Technical Working Papers 0170, National Bureau of Economic Research, Inc.
  10. Meyer, Bruce D & Viscusi, W Kip & Durbin, David L, 1995. "Workers' Compensation and Injury Duration: Evidence from a Natural Experiment," American Economic Review, American Economic Association, vol. 85(3), pages 322-40, June.
  11. Gueron, Judith M, 1990. "Work and Welfare: Lessons on Employment Programs," Journal of Economic Perspectives, American Economic Association, vol. 4(1), pages 79-98, Winter.
  12. Stephen H. Bell & Larry L. Orr, 1994. "Is Subsidized Employment Cost Effective for Welfare Recipients? Experimental Evidence from Seven State Demonstrations," Journal of Human Resources, University of Wisconsin Press, vol. 29(1), pages 42-61.
  13. repec:fth:prinin:261 is not listed on IDEAS
  14. Joshua D. Angrist, 1993. "The effect of veterans' benefits on education and earnings," Industrial and Labor Relations Review, ILR Review, Cornell University, ILR School, vol. 46(4), pages 637-652, July.
  15. David Card & Alan Krueger, 1993. "Minimum Wages and Employment: A Case Study of the Fast Food Industry in New Jersey and Pennsylvania," Working Papers 694, Princeton University, Department of Economics, Industrial Relations Section..
  16. Moffitt, Robert, 1992. "Incentive Effects of the U.S. Welfare System: A Review," Journal of Economic Literature, American Economic Association, vol. 30(1), pages 1-61, March.
  17. Bruce D. Meyer, 1989. "A Quasi-Experimental Approach to the Effects of Unemployment Insurance," NBER Working Papers 3159, National Bureau of Economic Research, Inc.
  18. Gary Burtless & Larry L. Orr, 1986. "Are Classical Experiments Needed for Manpower Policy," Journal of Human Resources, University of Wisconsin Press, vol. 21(4), pages 606-639.
  19. James J. Heckman, 1991. "Randomization and Social Policy Evaluation," NBER Technical Working Papers 0107, National Bureau of Economic Research, Inc.
  20. Cockx, Bart, 1990. "The Analysis of Transition Data by the Minimum Chi-Square Method. An Application to Welfare Spells in Belgium," Discussion Papers (IRES - Institut de Recherches Economiques et Sociales) 1995008, Université catholique de Louvain, Institut de Recherches Economiques et Sociales (IRES), revised 00 Mar 1995.
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Citations

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Cited by:
  1. Eichler, Martin & Lechner, Michael, 1999. "An Evaluation of Public Employment Programmes in the East German State of Sachsen-Anhalt," IZA Discussion Papers 94, Institute for the Study of Labor (IZA).
  2. Muriel Dejemeppe & Bart Cockx, 2005. "Duration dependence in the exit rate out of unemployment in Belgium. Is it true or spurious?," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 20(1), pages 1-23.
  3. Bart Cockx & Isabelle Bardoulat, 2000. "Vocational Training: Does it speed up the Transition Rate out of Unemployment?," Tinbergen Institute Discussion Papers 00-016/3, Tinbergen Institute.
  4. Gerard J. van den Berg & Bas van der Klaauw & Jan C. van Ours, 2004. "Punitive Sanctions and the Transition Rate from Welfare to Work," Journal of Labor Economics, University of Chicago Press, vol. 22(1), pages 211-241, January.
  5. Michael White and Genevieve Knight, 2003. "Benchmarking the effectiveness of NDYP: A review of European and US literature on the microeconomic effects of labour market programmes for young people," PSI Research Discussion Series 10, Policy Studies Institute, UK.
  6. Cockx, Bart & Brasseur, Carine, 2003. "The demand for physician services: Evidence from a natural experiment," Journal of Health Economics, Elsevier, vol. 22(6), pages 881-913, November.
  7. B. Cockx & M. Dejemeppe, 2010. "The Threat of Monitoring Job Search. A Discontinuity Design," Working Papers of Faculty of Economics and Business Administration, Ghent University, Belgium 10/685, Ghent University, Faculty of Economics and Business Administration.
  8. Muriel Dejemeppe & Bruno Van der Linden & Andrey Launov & Bart Cockx, 2011. "Monitoring and Sanctions in a Non-Stationary Structural Job-Search Model," 2011 Meeting Papers 501, Society for Economic Dynamics.
  9. Betcherman, Gordon & Olivas, Karina & Dar, Amit, 2004. "Impacts of active labor market programs : new evidence from evaluations with particular attention to developing and transition countries," Social Protection Discussion Papers 29142, The World Bank.
  10. Viktor Steiner & Tobias Hagen, 2002. "Was kann die Aktive Arbeitsmarktpolitik in Deutschland aus der Evaluationsforschung in anderen europäischen Ländern lernen?," Perspektiven der Wirtschaftspolitik, Verein für Socialpolitik, vol. 3(2), pages 189-206, 05.
  11. Cockx, Bart, 1999. "The Design of Active Labour Market Policies. What Matters and What Doesn't ?," Discussion Papers (IRES - Institut de Recherches Economiques et Sociales) 1999035, Université catholique de Louvain, Institut de Recherches Economiques et Sociales (IRES).
  12. Bart Cockx & Christian Goebel & Stéphane Robin, 2013. "Can income support for part-time workers serve as a stepping-stone to regular jobs? An application to young long-term unemployed women," Empirical Economics, Springer, vol. 44(1), pages 189-229, February.
  13. Berg, G. van den & Klaauw, B. van der & Ours, J.C. van, 1998. "Punitive sanctions and the transition from welfare to work," Discussion Paper 1998-56, Tilburg University, Center for Economic Research.
  14. Hagen, Tobias, 2003. "Three Approaches to the Evaluation of Active Labour Market Policy in East Germany Using Regional Data," ZEW Discussion Papers 03-27, ZEW - Zentrum für Europäische Wirtschaftsforschung / Center for European Economic Research.

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