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What Did All the Money Do? On the General Ineffectiveness of Recent West German Labour Market Programmes

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  • Conny Wunsch
  • Michael Lechner

Abstract

We provide new evidence on the effectiveness of West German labour market programmes by evaluating training and employment programmes that have been conducted 2000–2002 after the first large reform of German labour market policy in 1998. We employ exceptionally rich administrative data that allow us to use microeconometric matching methods and to estimate interesting effects for different types of programmes and participants at a rather disaggregated level. We find that, on average, all programmes fail to improve their participants' chances of finding regular, unsubsidised employment. Rather, participants accumulate 2–13 more months of unemployment than nonparticipants over the 2.5 years following programme start, which, in addition to direct programme costs, induces net costs in terms of benefit payments and wage subsidies amounting to, on average, 1500–7000 EUR per participant. However, we show that there is some scope for improvements in mean employment rates as well as potential for considerable cost savings by a reallocation of participants and nonparticipants to the different programmes.

Suggested Citation

  • Conny Wunsch & Michael Lechner, 2008. "What Did All the Money Do? On the General Ineffectiveness of Recent West German Labour Market Programmes," Kyklos, Wiley Blackwell, vol. 61(1), pages 134-174, February.
  • Handle: RePEc:bla:kyklos:v:61:y:2008:i:1:p:134-174
    DOI: 10.1111/j.1467-6435.2008.00396.x
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    1. Fredriksson, Peter & Johansson, Per, 2004. "Dynamic Treatment Assignment – The Consequences for Evaluations Using Observational Data," IZA Discussion Papers 1062, Institute of Labor Economics (IZA).
    2. Michael Lechner & Conny Wunsch, 2006. "Active Labour Market Policy in East Germany: Waiting for the Economy to Take Off," University of St. Gallen Department of Economics working paper series 2006 2006-24, Department of Economics, University of St. Gallen.
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    4. Michael Lechner & Stephan Wiehler, 2011. "Kids or courses? Gender differences in the effects of active labor market policies," Journal of Population Economics, Springer;European Society for Population Economics, vol. 24(3), pages 783-812, July.
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    13. Michael Lechner & Conny Wunsch, 2009. "Are Training Programs More Effective When Unemployment Is High?," Journal of Labor Economics, University of Chicago Press, vol. 27(4), pages 653-692, October.
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    JEL classification:

    • J68 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Public Policy

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