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Macroeconometric evaluation of active labour market policies in Germany - a dynamic panel approach using regional data

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Author Info
Hujer, Reinhard ()
Caliendo, Marco ()
Zeiss, Christopher ()
Blien, Uwe ()

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Abstract

Most evaluation studies of active labour market policies (ALMP) focus on the microeconometric evaluation approach and work with individual data. The main question is if the interesting outcome variable for an individual is affected by the participation in an ALMP programme. That being done, the direct gain can be compared with the associated costs and the success of the programme can be judged. However, microeconometric approaches estimate in nearly all cases the effect of treatment on the treated, ignoring impacts on the non-participants. Therefore this type of analysis should only be seen as a first step of a complete evaluation, because general equilibrium effects are neglected. These are very likely to occur regarding the immense amounts spend on ALMP in Germany. One possible solution to overcome the pitfalls of the microeconometric approach is to carry out a macroeconometric analysis. Instead of looking at the effect on individuals performance we would like to know if the ALMPs represent a net gain to the whole economy. This is likely to be the case only, if the total number of jobs is positively affected by labour market policies. Empirical work on the macroeconomic effects of ALMPs is rare and this might be due to several reasons. The first obstacle is the absence of an obvious theoretical framework within which to couch the analysis. Leaving the traditional way of 'cheating the Phillips curve' aside we use a standard labour market framework to consider the effects of ALMP on the matching, the job creation and the wage setting process. A second problem which has to be solved is the inherent simultaneity problem. Spending on ALMP should influence the labo market situation but might also be determined by it. One way to solve this, is an instrumental variable approach, where the issue of finding the right instruments is of major importance. A further problem is the availability of suitable data, whic allows to take regional heterogeneity into account. Especially in Germany this is problematic due to permanent adjustments in th regional delimitations of the labour office districts (Arbeitsamtsbezirke). In contrast to other evaluation studies we use adjusted data, which is corrected for these changes. This should allow us to obtain more accurate results. The aim of the study is to add a new perspective to the evaluation of ALMP in Germany. This is done by using regional data to obtain macroeconomic or net-effects of these measures. We hope to give advice for future policy implementation.

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Paper provided by European Regional Science Association in its series ERSA conference papers with number ersa02p225.

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Date of creation: Aug 2002
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Handle: RePEc:wiw:wiwrsa:ersa02p225

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References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
  1. Jeffrey Smith, 2000. "A Critical Survey of Empirical Methods for Evaluating Active Labor Market Policies," UWO Department of Economics Working Papers 20006, University of Western Ontario, Department of Economics. [Downloadable!]
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  2. Layard, Richard & Nickell, Stephen, 1986. "Unemployment in Britain," Economica, London School of Economics and Political Science, vol. 53(210(S)), pages S121-69, Supplemen. [Downloadable!] (restricted)
  3. Arellano, Manuel & Bond, Stephen, 1991. "Some Tests of Specification for Panel Data: Monte Carlo Evidence and an Application to Employment Equations," Review of Economic Studies, Blackwell Publishing, vol. 58(2), pages 277-97, April. [Downloadable!] (restricted)
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  5. Stephen Bond & Frank Windmeijer, 2002. "Finite Sample Inference for GMM Estimators in Linear Panel Data Models," 10th International Conference on Panel Data, Berlin, July 5-6, 2002 C6-3, International Conferences on Panel Data. [Downloadable!]
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  6. Richard Jackman & Christopher A. Pissarides & S Savouri, 1990. "Labour Market Policies and Unemployment in the OECD," CEP Discussion Papers dp0011, Centre for Economic Performance, LSE.
  7. James J. Heckman, 1999. "Accounting for Heterogeneity, Diversity, and General Equilibriumin Evaluating Social Programs," NBER Working Papers 7230, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
  8. Bernd Fitzenberger & Reinhard Hujer, 2002. "Stand und Perspektiven der Evaluation der Aktiven Arbeitsmarktpolitik in Deutschland," Perspektiven der Wirtschaftspolitik, Blackwell Publishing, vol. 3(2), pages 139-158, 05. [Downloadable!] (restricted)
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  10. Hujer, Reinhard & Fitzenberger, Bernd, 2002. "Stand und Perspektiven der Evaluation der aktiven Arbeitsmarktpolitik in Deutschland," ZEW Discussion Papers 02-13, ZEW - Zentrum für Europäische Wirtschaftsforschung / Center for European Economic Research. [Downloadable!]
  11. Calmfors, Lars & Forslund, Anders & Hemström, Maria, 2002. "Does active labour market policy work? Lessons from the Swedish experiences," Working Paper Series 2002:4, IFAU - Institute for Labour Market Policy Evaluation. [Downloadable!]
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  12. Richard Blundell & Steve Bond & Frank Windmeijer, 2000. "Estimation in dynamic panel data models: improving on the performance of the standard GMM estimator," IFS Working Papers W00/12, Institute for Fiscal Studies. [Downloadable!]
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  16. Hujer, Reinhard & Caliendo, Marco, 2000. "Evaluation of Active Labour Market Policy: Methodological Concepts and Empirical Estimates," IZA Discussion Papers 236, Institute for the Study of Labor (IZA). [Downloadable!]
  17. Blundell, Richard & Bond, Stephen, 1998. "Initial conditions and moment restrictions in dynamic panel data models," Journal of Econometrics, Elsevier, vol. 87(1), pages 115-143, August. [Downloadable!] (restricted)
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  18. Holmlund, Bertil & Linden, Johan, 1993. "Job matching, temporary public employment, and equilibrium unemployment," Journal of Public Economics, Elsevier, vol. 51(3), pages 329-343, July. [Downloadable!] (restricted)
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  19. Calmfors, Lars & Forslund, Anders, 1991. "Real-Wage Determination and Labour Market Policies: The Swedish Experience," Economic Journal, Royal Economic Society, vol. 101(408), pages 1130-48, September. [Downloadable!] (restricted)
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  22. Hujer, Reinhard & Wellner, Marc, 2000. "The Effects of Public Sector Sponsored Training on Individual Employment Performance in East Germany," IZA Discussion Papers 141, Institute for the Study of Labor (IZA). [Downloadable!]
  23. Anders Forslund & Alan B. Krueger, 1994. "An Evaluation of the Swedish Active Labor Market Policy: New and Received Wisdom," NBER Working Papers 4802, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
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  24. Davidson, Carl & Woodbury, Stephen A, 1993. "The Displacement Effect of Reemployment Bonus Programs," Journal of Labor Economics, University of Chicago Press, vol. 11(4), pages 575-605, October. [Downloadable!] (restricted)
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  25. repec:fth:prinin:332 is not listed on IDEAS
  26. Martin Neil Baily & James Tobin, 1977. "Macroeconomic Effects of Selective Public Employment and Wage Subsidies," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 8(1977-2), pages 511-544. [Downloadable!]
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  28. Pannenberg, Markus & Schwarze, Johannes, 1998. "Labor market slack and the wage curve," Economics Letters, Elsevier, vol. 58(3), pages 351-354, March. [Downloadable!] (restricted)
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Cited by:
(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. Arntz, Melanie, 2005. "The Geographical Mobility of Unemployed Workers : Evidence from West Germany," ZEW Discussion Papers 05-34, ZEW - Zentrum für Europäische Wirtschaftsforschung / Center for European Economic Research. [Downloadable!]
  2. Caliendo, Marco & Steiner, Viktor, 2005. "Aktive Arbeitsmarktpolitik in Deutschland : Bestandsaufnahme und Bewertung der mikroökonomischen Evaluationsergebnisse (Active labour market policy in Germany * review ans assessment of the microecon," Zeitschrift für ArbeitsmarktForschung - Journal for Labour Market Research, Institut für Arbeitsmarkt- und Berufsforschung (IAB), Nürnberg [Institute for Employment Research, Nuremberg, Germany], vol. 38(2/3), pages 396-418. [Downloadable!]
  3. Reinhard Hujer & Marco Caliendo, 2003. "Lohnsubventionen in Deutschland: wie sieht eine optimale Evaluierungsstrategie aus?," Vierteljahrshefte zur Wirtschaftsforschung / Quarterly Journal of Economic Research, DIW Berlin, German Institute for Economic Research, vol. 72(1), pages 109-123.
  4. 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. [Downloadable!]
  5. Jekaterina Dmitrijeva & Mihails Hazans, 2005. "A stock-flow matching approach to evaluation of public training program in a high unemployment environment," Labor and Demography 0506007, EconWPA. [Downloadable!]
    Other versions:
  6. Hujer, Reinhard & Zeiss, Christopher, 2003. "Macroeconomic Impacts of ALMP on the Matching Process in West Germany," IZA Discussion Papers 915, Institute for the Study of Labor (IZA). [Downloadable!]
  7. Carlo Altavilla & Floro Ernesto Caroleo, 2006. "Evaluating the Dynamic Effects of Active Labour Policies in Italy," Discussion Papers 8_2006, D.E.S. (Department of Economic Studies), University of Naples "Parthenope", Italy. [Downloadable!]
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  8. Lena Jacobi & Jochen Kluve, 2006. "Before and After the Hartz Reforms: The Performance of Active Labour Market Policy in Germany," IZA Discussion Papers 2100, Institute for the Study of Labor (IZA). [Downloadable!]
  9. Carlo Altavilla, Floro Ernesto Caroleo, 2004. "Evaluating Asimmetries in Active Labour Policies: The Case of Italy," CELPE Discussion Papers 84, CELPE (Centre of Labour Economics and Economic Policy), University of Salerno, Italy. [Downloadable!]
  10. Konle-Seidl, Regina, 2005. "Lessons learned: Internationale Evaluierungsergebnisse zu Wirkungen aktiver und aktivierender Arbeitsmarktpolitik," IAB-Forschungsbericht 200509, Institut für Arbeitsmarkt- und Berufsforschung (IAB), Nürnberg [Institute for Employment Research, Nuremberg, Germany]. [Downloadable!]
  11. David C. Maré, 2005. "Indirect Effects of Active Labour Market Policies," Working Papers 05_01, Motu Economic and Public Policy Research. [Downloadable!]
    Other versions:
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