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Does the Impact of Active Labor Market Programs Depend on the State of the Labor Market? The Case of the UK New Deal for Young People

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McVicar, Duncan
Podivinsky, Jan M

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Abstract

There is much debate, but surprisingly little evidence, concerning the impact of primarily supply side Active Labor Market Programs (ALMPs) in labor markets characterised by weak labor demand. The usual argument is that we might expect ALMPs to have greater impacts in tight labor markets than in slack ones because more (and perhaps better) job vacancies exist. On the other hand, the added value of such programs may be lower in tighter labor markets. In this paper we explore whether a mandatory ALMP for unemployed young people introduced in 1998 – the UK New Deal for Young People – has had differential impacts on the probability of unemployment exits in different local labor markets. Our results show this to be the case, with robust evidence indicating that the program impact on the hazard rate for entry to employment decreases with the local unemployment rate.
Keywords; New Deal for Young People, Mixed proportional Hazard Models, Unemployment, Labor Demand, Competing Risks
JEL Classification: J64, J68

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Paper provided by Economics Division, School of Social Sciences, University of Southampton in its series Discussion Paper Series In Economics And Econometrics with number 0704.

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Handle: RePEc:stn:sotoec:0704

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  1. Dan A. Black & Jeffrey A. Smith & Mark C. Berger & Brett J. Noel, 2002. "Is the Threat of Reemployment Services More Effective than the Services Themselves? Experimental Evidence from the UI System," NBER Working Papers 8825, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
  2. McVicar, Duncan & Podivinsky, P, 2003. "How Well Has the New Deal for Young People Worked in the UK Regions?," Working Papers NIERC. 79, Economic Research Institute of Northern Ireland. [Downloadable!]
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  3. Van den Berg, Gerard J., 2000. "Duration Models: Specification, Identification, and Multiple Durations," MPRA Paper 9446, University Library of Munich, Germany. [Downloadable!]
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  4. Barbara Sianesi, 2004. "An Evaluation of the Swedish System of Active Labor Market Programs in the 1990s," The Review of Economics and Statistics, MIT Press, vol. 86(1), pages 133-155, 09. [Downloadable!] (restricted)
  5. Lawrence F. Katz, 1996. "Wage Subsidies for the Disadvantaged," NBER Working Papers 5679, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
  6. John P Martin, 1998. "What Works Among Active Labour Market Policies: Evidence from OECD Countries' Experiences," RBA Annual Conference Volume, in: Guy Debelle & Jeff Borland (ed.), Unemployment and the Australian Labour Market Reserve Bank of Australia. [Downloadable!]
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  7. Carling, Kenneth & Larsson, Laura, 2005. "Does early intervention help the unemployed youth?," Labour Economics, Elsevier, vol. 12(3), pages 301-319, June. [Downloadable!] (restricted)
  8. Richard Blundell & Monica Costa Dias & Costas Meghir & John Van Reenen, 2004. "Evaluating the Employment Impact of a Mandatory Job Search Program," Journal of the European Economic Association, MIT Press, vol. 2(4), pages 569-606, 06. [Downloadable!] (restricted)
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  9. Bonnal, Liliane & Fougere, Denis & Serandon, Anne, 1997. "Evaluating the Impact of French Employment Policies on Individual Labour Market Histories," Review of Economic Studies, Blackwell Publishing, vol. 64(4), pages 683-713, October. [Downloadable!] (restricted)
  10. Dolton, Peter & O'Neill, Donal, 1996. "Unemployment Duration and the Restart Effect: Some Experimental Evidence," Economic Journal, Royal Economic Society, vol. 106(435), pages 387-400, March. [Downloadable!] (restricted)
  11. Bolvig, Iben & Jensen, Peter & Rosholm, Michael, 2003. "The Employment Effects of Active Social Policy," IZA Discussion Papers 736, Institute for the Study of Labor (IZA). [Downloadable!]
  12. Rebecca M. Blank, 2002. "Evaluating Welfare Reform in the United States," Journal of Economic Literature, American Economic Association, vol. 40(4), pages 1105-1166, December.
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  13. Rebecca M. Blank, 1997. "What Causes Public Assistance Caseloads to Grow?," NBER Working Papers 6343, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
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  14. Dorsett, Richard, 2006. "The new deal for young people: effect on the labour market status of young men," Labour Economics, Elsevier, vol. 13(3), pages 405-422, June. [Downloadable!] (restricted)
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