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Disentangling Treatment Effects of Active Labor Market Policies: The Role of Labor Force Status Sequences

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  • Kluve, Jochen
  • Lehmann, Hartmut
  • Schmidt, Christoph M.

Abstract

This paper estimates treatment effects of two active labor market policies - a training program and a wage subsidy scheme - on participants' employment probabilities. The analysis is based on unique data from the 18th wave of the Polish Labor Force Survey containing detailed and extensive individual labor force status histories. We discuss two variants of an exact covariate matching procedure adapted to the specific nature of the data. Our study confirms and reinforces a point raised in recent research [Heckman, J.J., Smith, J.A. The Pre-programme Earnings Dip and the Determinants of Participation in a Social Programme: Implications for Simple Programme Evaluation Strategies. The Economic Journal 1999; 109; 313-348., Heckman, J.J., Smith, J.A. The Determinants of Participation in a Social Program: Evidence from a Prototypical Job Training Program. Journal of Labor Economics 2004; 22; 243-298.], that pre-treatment labor force status dynamics play a decisive role in determining program participation. We implement a conditional difference-in-differences estimator of treatment effects based on these individual trinomial sequences of pre-treatment labor market status. The estimator employs a "moving window" technique that nicely controls for changes in the macroeconomic environment over time. Our findings suggest that training raises individual employment probability, while wage subsidies display negative treatment effects for participants in the Polish case.

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  • Kluve, Jochen & Lehmann, Hartmut & Schmidt, Christoph M., 2008. "Disentangling Treatment Effects of Active Labor Market Policies: The Role of Labor Force Status Sequences," Labour Economics, Elsevier, vol. 15(6), pages 1270-1295, December.
  • Handle: RePEc:eee:labeco:v:15:y:2008:i:6:p:1270-1295
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    3. Hartmut Lehmann & Jochen Kluve, 2010. "Assessing Active Labour Market Policies in Transition Economies," AIEL Series in Labour Economics, in: Floro Ernesto Caroleo & Francesco Pastore (ed.), The Labour Market Impact of the EU Enlargement, pages 275-307, Springer.
    4. Alessio Brown & Johannes Koettl, 2015. "Active labor market programs - employment gain or fiscal drain?," IZA Journal of Labor Economics, Springer;Forschungsinstitut zur Zukunft der Arbeit GmbH (IZA), vol. 4(1), pages 1-36, December.
    5. Lechner Michael & Miquel Ruth & Wunsch Conny, 2007. "The Curse and Blessing of Training the Unemployed in a Changing Economy: The Case of East Germany After Unification," German Economic Review, De Gruyter, vol. 8(4), pages 468-509, December.
    6. Galecka-Burdziak, Ewa & Góra, Marek & Jessen, Jonas & Jessen, Robin & Kluve, Jochen, 2021. "The Effects of Shortening Potential Benefit Duration: Evidence from Regional Cut-Offs and a Policy Reform," IZA Discussion Papers 14340, Institute of Labor Economics (IZA).
    7. Verónica Escudero, 2018. "Are active labour market policies effective in activating and integrating low-skilled individuals? An international comparison," IZA Journal of Labor Policy, Springer;Forschungsinstitut zur Zukunft der Arbeit GmbH (IZA), vol. 7(1), pages 1-26, December.
    8. Kluve, Jochen, 2006. "The Effectiveness of European Active Labor Market Policy," IZA Discussion Papers 2018, Institute of Labor Economics (IZA).
    9. H. Lehmann & A. Muravyev, 2012. "Labor Market Institutions and Informality in Transition and Latin American Countries," Working Papers wp854, Dipartimento Scienze Economiche, Universita' di Bologna.
    10. Schmidt Christoph M., 2014. "Wirkungstreffer erzielen – Die Rolle der evidenzbasierten Politikberatung in einer aufgeklärten Gesellschaft," Perspektiven der Wirtschaftspolitik, De Gruyter, vol. 15(3), pages 219-233, October.
    11. Rainer Eppel & Helmut Mahringer, 2012. "Do wage subsidies work in boosting economic inclusion? Evidence on e," EcoMod2012 4065, EcoMod.
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    13. Zaiceva, Anzelika, 2010. "East-West migration and gender: Is there a differential effect for migrant women?," Labour Economics, Elsevier, vol. 17(2), pages 443-454, April.
    14. Lilas Demmou & Andreas Wörgötter, 2015. "Boosting Productivity in Russia: Skills, Education and Innovation," OECD Economics Department Working Papers 1189, OECD Publishing.
    15. Niklas Potrafke, 2012. "Political cycles and economic performance in OECD countries: empirical evidence from 1951–2006," Public Choice, Springer, vol. 150(1), pages 155-179, January.
    16. Michael Lechner & Ruth Miquel & Conny Wunsch, 2007. "The Curse and Blessing of Training the Unemployed in a Changing Economy: The Case of East Germany After Unification," German Economic Review, Verein für Socialpolitik, vol. 8(4), pages 468-509, November.
    17. Pasquini, Alessandra & Centra, Marco & Pellegrini, Guido, 2019. "Fighting long-term unemployment: Do we have the whole picture?," Labour Economics, Elsevier, vol. 61(C).
    18. Stavros Rodokanakis, 2010. "Unemployment Risk in Southern Greece," Romanian Economic Journal, Department of International Business and Economics from the Academy of Economic Studies Bucharest, vol. 13(35), pages 55-82, (1).
    19. Gockel, Ryan P. & Cullen, Alison C., 2013. "Willing, but Unable: Determinants of Participation Rates for TrainingWorkshops in Central Vietnam," Asian Journal of Agriculture and Rural Development, Asian Economic and Social Society (AESS), vol. 3(10), pages 1-15, October.
    20. Alessio J. G. Brown, 2015. "Can hiring subsidies benefit the unemployed?," IZA World of Labor, Institute of Labor Economics (IZA), pages 163-163, June.
    21. Núria Rodríguez-Planas & Benus Jacob, 2010. "Evaluating active labor market programs in Romania," Empirical Economics, Springer, vol. 38(1), pages 65-84, February.
    22. Mario Mechtel & Niklas Potrafke, 2012. "Aktive Arbeitsmarktpolitik und Wahltermine," ifo Schnelldienst, ifo Institute - Leibniz Institute for Economic Research at the University of Munich, vol. 65(16), pages 35-37, August.
    23. Mechtel, Mario & Potrafke, Niklas, 2009. "Political Cycles in Active Labor Market Policies," MPRA Paper 14270, University Library of Munich, Germany.
    24. Stavros Rodokanakis, 2010. "A Non-Experimental Evaluation of Unemployment Risk in Crete and the Ionian Islands: Regional Evidence for Greece," Acta Oeconomica Pragensia, Prague University of Economics and Business, vol. 2010(4), pages 44-63.
    25. Doiron, Denise & Gørgens, Tue, 2008. "State dependence in youth labor market experiences, and the evaluation of policy interventions," Journal of Econometrics, Elsevier, vol. 145(1-2), pages 81-97, July.

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