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

  • J. Kluve
  • H. Lehmann
  • C. M. Schmidt

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 and Smith 1999, 2004), 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 pretreatment 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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Paper provided by Dipartimento Scienze Economiche, Universita' di Bologna in its series Working Papers with number 620.

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Date of creation: Dec 2007
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Handle: RePEc:bol:bodewp:620
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  1. James J. Heckman & Jeffrey Smith, 2003. "The Determinants of Participation in a Social Program: Evidence from a Prototypical Job Training Program," University of Western Ontario, Centre for Human Capital and Productivity (CHCP) Working Papers 20034, University of Western Ontario, Centre for Human Capital and Productivity (CHCP).
  2. Marek Gora and Christoph M. Schmidt & Marek Gora and Christoph M. Schmidt, 1997. "Long-Term Unemployment, Unemployment Benefits and Social Assistance: The Polish Experience," William Davidson Institute Working Papers Series 110, William Davidson Institute at the University of Michigan.
  3. Fredriksson, Peter & Johansson, Per, 2002. "Program Evaluation and Random Program Starts," Working Paper Series 2003:1, Uppsala University, Department of Economics.
  4. James J. Heckman & Hidehiko Ichimura & Petra Todd, 1998. "Matching As An Econometric Evaluation Estimator," Review of Economic Studies, Oxford University Press, vol. 65(2), pages 261-294.
  5. Jochen Kluve & Hartmut Lehmann & Christopher Schmidt, 1998. "Active Labor Market Policies in Poland: Human Capital Enhancement, Stigmatization or Benefit Churning?," William Davidson Institute Working Papers Series 215, William Davidson Institute at the University of Michigan.
  6. Puhani, Patrick A., 1998. "Advantage through training? A microeconometric evaluation of the employment effects of active labour market programmes in Poland," ZEW Discussion Papers 98-25, ZEW - Zentrum für Europäische Wirtschaftsforschung / Center for European Economic Research.
  7. Dehejia, Rajeev, 2005. "Practical propensity score matching: a reply to Smith and Todd," Journal of Econometrics, Elsevier, vol. 125(1-2), pages 355-364.
  8. Kluve, Jochen & Schneider, Hilmar & Uhlendorff, Arne & Zhao, Zhong, 2007. "Evaluating continuous training programs using the generalized propensity score1," Technical Reports 2007,39, Technische Universität Dortmund, Sonderforschungsbereich 475: Komplexitätsreduktion in multivariaten Datenstrukturen.
  9. Kluve, Jochen, 2006. "The Effectiveness of European Active Labor Market Policy," IZA Discussion Papers 2018, Institute for the Study of Labor (IZA).
  10. Card, David & Sullivan, Daniel G, 1988. "Measuring the Effect of Subsidized Training Programs on Movements in and out of Employment," Econometrica, Econometric Society, vol. 56(3), pages 497-530, May.
  11. Lechner, Michael & Wiehler, Stephan, 2007. "Does the Order and Timing of Active Labor Market Programs Matter?," IZA Discussion Papers 3092, Institute for the Study of Labor (IZA).
  12. Kluve, Jochen & Schneider, Hilmar & Uhlendorff, Arne & Zhao, Zhong, 2007. "Evaluating Continuous Training Programs Using the Generalized Propensity Score," IZA Discussion Papers 3255, Institute for the Study of Labor (IZA).
  13. Michael Lechner & Ruth Miquel & Conny Wunsch, 2004. "Long-run Effects of Public Sector Sponsored Training in West Germany," University of St. Gallen Department of Economics working paper series 2004 2004-19, Department of Economics, University of St. Gallen.
  14. Lubyova, Martina & van Ours, Jan C., 1999. "Effects of Active Labor Market Programs on the Transition Rate from Unemployment into Regular Jobs in the Slovak Republic," Journal of Comparative Economics, Elsevier, vol. 27(1), pages 90-112, March.
  15. Guido W. Imbens, 2003. "Nonparametric Estimation of Average Treatment Effects under Exogeneity: A Review," NBER Technical Working Papers 0294, National Bureau of Economic Research, Inc.
  16. Jochen Kluve & Christoph M. Schmidt, 2002. "Can training and employment subsidies combat European unemployment?," Economic Policy, CEPR;CES;MSH, vol. 17(35), pages 409-448, October.
  17. Ashenfelter, Orley C, 1978. "Estimating the Effect of Training Programs on Earnings," The Review of Economics and Statistics, MIT Press, vol. 60(1), pages 47-57, February.
  18. Orley Ashenfelter & David Card, 1984. "Using the Longitudinal Structure of Earnings to Estimate the Effect of Training Programs," NBER Working Papers 1489, National Bureau of Economic Research, Inc.
  19. A. Smith, Jeffrey & E. Todd, Petra, 2005. "Does matching overcome LaLonde's critique of nonexperimental estimators?," Journal of Econometrics, Elsevier, vol. 125(1-2), pages 305-353.
  20. LaLonde, Robert J, 1986. "Evaluating the Econometric Evaluations of Training Programs with Experimental Data," American Economic Review, American Economic Association, vol. 76(4), pages 604-20, September.
  21. Rajeev H. Dehejia & Sadek Wahba, 1998. "Causal Effects in Non-Experimental Studies: Re-Evaluating the Evaluation of Training Programs," NBER Working Papers 6586, National Bureau of Economic Research, Inc.
  22. Michael Lechner, 2002. "Program Heterogeneity And Propensity Score Matching: An Application To The Evaluation Of Active Labor Market Policies," The Review of Economics and Statistics, MIT Press, vol. 84(2), pages 205-220, May.
  23. Kluve, Jochen, 2006. "The Effectiveness of European Active Labor Market Policy," RWI Discussion Papers 37, Rheinisch-Westfälisches Institut für Wirtschaftsforschung (RWI).
  24. Rajeev H. Dehejia & Sadek Wahba, 2002. "Propensity Score-Matching Methods For Nonexperimental Causal Studies," The Review of Economics and Statistics, MIT Press, vol. 84(1), pages 151-161, February.
  25. Heckman, James J. & Lalonde, Robert J. & Smith, Jeffrey A., 1999. "The economics and econometrics of active labor market programs," Handbook of Labor Economics, in: O. Ashenfelter & D. Card (ed.), Handbook of Labor Economics, edition 1, volume 3, chapter 31, pages 1865-2097 Elsevier.
  26. James J. Heckman & Hidehiko Ichimura & Petra E. Todd, 1997. "Matching As An Econometric Evaluation Estimator: Evidence from Evaluating a Job Training Programme," Review of Economic Studies, Oxford University Press, vol. 64(4), pages 605-654.
  27. Lechner, Michael, 1999. "Identification and Estimation of Causal Effects of Multiple Treatments Under the Conditional Independence Assumption," IZA Discussion Papers 91, Institute for the Study of Labor (IZA).
  28. Smith, Jeffrey & Todd, Petra, 2005. "Rejoinder," Journal of Econometrics, Elsevier, vol. 125(1-2), pages 365-375.
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