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The Effect of Active Labor Market Programs on Not-Yet Treated Unemployed Individuals

  • Gerard J. van den Berg
  • Annette H. Bergemann
  • Marco Caliendo

Labor market programs may affect unemployed individuals' behavior before they enroll. Such ex ante effects are hard to identify without model assumptions. We develop a novel method that relates self-reported perceived treatment rates and job-search behavioral outcomes, like the reservation wage, to each other, among newly unemployed workers. Job search theory is used to derive theoretical predictions. To deal with effect heterogeneity and selectivity, the effects of interest are estimated by propensity score matching. We apply the method to the German active labor market program system, using a novel data set including self-reported assessments of the variables of interest as well as unusually detailed information on behavior, attitudes, and past outcomes. We find that the system generates a negative ex ante effect on the reservation wage and a positive effect on search effort. (JEL: J64, C21, D83, D84) (c) 2009 by the European Economic Association.

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Article provided by MIT Press in its journal Journal of the European Economic Association.

Volume (Year): 7 (2009)
Issue (Month): 2-3 (04-05)
Pages: 606-616

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Handle: RePEc:tpr:jeurec:v:7:y:2009:i:2-3:p:606-616
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  1. Marco Caliendo & Sabine Kopeinig, 2005. "Some Practical Guidance for the Implementation of Propensity Score Matching," Discussion Papers of DIW Berlin 485, DIW Berlin, German Institute for Economic Research.
  2. Lancaster, Tony, 1985. "Simultaneous equations models in applied search theory," Journal of Econometrics, Elsevier, vol. 28(1), pages 113-126, April.
  3. Guido M. Imbens & Jeffrey M. Wooldridge, 2008. "Recent Developments in the Econometrics of Program Evaluation," NBER Working Papers 14251, National Bureau of Economic Research, Inc.
  4. van den Berg, Gerard J, 1990. "Nonstationarity in Job Search Theory," Review of Economic Studies, Wiley Blackwell, vol. 57(2), pages 255-77, April.
  5. Barbara Sianesi, 2001. "Propensity score matching," United Kingdom Stata Users' Group Meetings 2001 12, Stata Users Group, revised 23 Aug 2001.
  6. Jaap H. Abbring & Gerard J. van den Berg, 2005. "Social Experiments and Instrumental Variables with Duration Outcomes," Tinbergen Institute Discussion Papers 05-047/3, Tinbergen Institute.
  7. van den Berg, Gerard J., 2007. "An Economic Analysis of Exclusion Restrictions for Instrumental Variable Estimation," IZA Discussion Papers 2585, Institute for the Study of Labor (IZA).
  8. Edwin Leuven & Barbara Sianesi, 2003. "PSMATCH2: Stata module to perform full Mahalanobis and propensity score matching, common support graphing, and covariate imbalance testing," Statistical Software Components S432001, Boston College Department of Economics, revised 19 Jan 2015.
  9. Lalive, R. & van Ours, J.C. & Zweimüller, J., 2002. "The Effect of Benefit Sanctions on the Duration of Unemployment," Discussion Paper 2002-19, Tilburg University, Center for Economic Research.
  10. van den Berg, Gerard J. & van der Klaauw, Bas, 2001. "Counseling and Monitoring of Unemployed Workers: Theory and Evidence from a Controlled Social Experiment," IZA Discussion Papers 374, Institute for the Study of Labor (IZA).
  11. Gerard van den Berg & Bas van der Klaauw, 2000. "Counseling and Monitoring of Unemployed Workers: Theory and Evidence from a Social Experiment," Econometric Society World Congress 2000 Contributed Papers 0972, Econometric Society.
  12. Jaap Abbring & Gerard van den Berg, 2005. "Social experiments and instrumental variables with duration outcomes," IFS Working Papers W05/19, Institute for Fiscal Studies.
  13. Jaap H. Abbring & Gerard J. van den Berg, 2003. "The Nonparametric Identification of Treatment Effects in Duration Models," Econometrica, Econometric Society, vol. 71(5), pages 1491-1517, 09.
  14. repec:dgr:uvatin:2005047 is not listed on IDEAS
  15. Dan A. Black & Jeffrey A. Smith & Mark C. Berger & Brett J. Noel, 2003. "Is the Threat of Reemployment Services More Effective Than the Services Themselves? Evidence from Random Assignment in the UI System," American Economic Review, American Economic Association, vol. 93(4), pages 1313-1327, September.
  16. Berg, G.J. van den & Gorter, C., 1996. "Job search and commuting time," Serie Research Memoranda 0001, VU University Amsterdam, Faculty of Economics, Business Administration and Econometrics.
  17. Lancaster, Tony & Chesher, Andrew, 1983. "An Econometric Analysis of Reservation Wages," Econometrica, Econometric Society, vol. 51(6), pages 1661-76, November.
  18. Bernhard, Sarah & Hohmeyer, Katrin & Jozwiak, Eva & Koch, Susanne & Kruppe, Thomas & Stephan, Gesine & Wolff, Joachim, 2008. "Aktive Arbeitsmarktpolitik in Deutschland und ihre Wirkungen," IAB-Forschungsbericht 200802, Institut für Arbeitsmarkt- und Berufsforschung (IAB), Nürnberg [Institute for Employment Research, Nuremberg, Germany].
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