IDEAS home Printed from https://ideas.repec.org/p/cpr/ceprdp/11923.html
   My bibliography  Save this paper

How Effective Are Active Labor Market Policies in Developing Countries? A Critical Review of Recent Evidence

Author

Listed:
  • McKenzie, David J.

Abstract

Jobs are the number one policy concern of policymakers in many countries. The global financial crisis, rising demographic pressures, high unemployment rates, and concerns over automation all make it seem imperative that policymakers employ increasingly more active labor market policies. This paper critically examines recent evaluations of labor market policies that have provided vocational training, wage subsidies, job search assistance, and assistance moving to argue that many active labor market policies are much less effective than policymakers typically assume. Many of these evaluations find no significant impacts on either employment or earnings. One reason is that urban labor markets appear to work reasonably well in many cases, with fewer market failures than is often thought. As a result, there is less of a role for many traditional active labor market policies than is common practice. The review then discusses examples of job creation policies that do seem to offer promise, and concludes with lessons for impact evaluation and policy is this area.

Suggested Citation

  • McKenzie, David J., 2017. "How Effective Are Active Labor Market Policies in Developing Countries? A Critical Review of Recent Evidence," CEPR Discussion Papers 11923, C.E.P.R. Discussion Papers.
  • Handle: RePEc:cpr:ceprdp:11923
    as

    Download full text from publisher

    File URL: http://www.cepr.org/active/publications/discussion_papers/dp.php?dpno=11923
    Download Restriction: CEPR Discussion Papers are free to download for our researchers, subscribers and members. If you fall into one of these categories but have trouble downloading our papers, please contact us at subscribers@cepr.org

    As the access to this document is restricted, you may want to look for a different version below or search for a different version of it.

    Other versions of this item:

    References listed on IDEAS

    as
    1. Martin Abel & Rulof Burger & Patrizio Piraino, 2017. "The value of reference letters," Working Papers 06/2017, Stellenbosch University, Department of Economics.
    2. Bruno Crépon & Esther Duflo & Marc Gurgand & Roland Rathelot & Philippe Zamora, 2013. "Do Labor Market Policies have Displacement Effects? Evidence from a Clustered Randomized Experiment," The Quarterly Journal of Economics, Oxford University Press, vol. 128(2), pages 531-580.
    3. repec:eee:labeco:v:45:y:2017:i:c:p:116-130 is not listed on IDEAS
    4. Emily A. Beam & David McKenzie & Dean Yang, 2016. "Unilateral Facilitation Does Not Raise International Labor Migration from the Philippines," Economic Development and Cultural Change, University of Chicago Press, vol. 64(2), pages 323-368.
    5. Orazio Attanasio & Arlen Guarín & Carlos Medina & Costas Meghir, 2015. "Long Term Impacts of Vouchers for Vocational Training: Experimental Evidence for Colombia," BORRADORES DE ECONOMIA 013326, BANCO DE LA REPÚBLICA.
    6. Levinsohn, James & Pugatch, Todd, 2014. "Prospective analysis of a wage subsidy for Cape Town youth," Journal of Development Economics, Elsevier, vol. 108(C), pages 169-183.
    7. Achyuta Adhvaryu & Namrata Kala & Anant Nyshadham, 2018. "The Skills to Pay the Bills: Returns to On-the-job Soft Skills Training," NBER Working Papers 24313, National Bureau of Economic Research, Inc.
    8. Maitra, Pushkar & Mani, Subha, 2017. "Learning and earning: Evidence from a randomized evaluation in India," Labour Economics, Elsevier, vol. 45(C), pages 116-130.
    9. Pablo Ibarraran & Laura Ripani & Bibiana Taboada & Juan Villa & Brigida Garcia, 2014. "Life skills, employability and training for disadvantaged youth: Evidence from a randomized evaluation design," IZA Journal of Labor & Development, Springer;Forschungsinstitut zur Zukunft der Arbeit GmbH (IZA), vol. 3(1), pages 1-24, December.
    10. Crépon, Bruno & van den Berg, Gerard J., 2016. "Active Labor Market Policies," IZA Discussion Papers 10321, Institute of Labor Economics (IZA).
    11. Ana Dammert & Jose Galdo & Virgilio Galdo, 2015. "Integrating mobile phone technologies into labor-market intermediation: a multi-treatment experimental design," IZA Journal of Labor & Development, Springer;Forschungsinstitut zur Zukunft der Arbeit GmbH (IZA), vol. 4(1), pages 1-27, December.
    12. Emanuela Galasso & Martin Ravallion & Agustin Salvia, 2004. "Assisting the Transition from Workfare to Work: A Randomized Experiment," ILR Review, Cornell University, ILR School, vol. 58(1), pages 128-142, October.
    13. John Gibson & David McKenzie, 2014. "The Development Impact of a Best Practice Seasonal Worker Policy," The Review of Economics and Statistics, MIT Press, vol. 96(2), pages 229-243, May.
    14. David McKenzie & Nabila Assaf & Ana Paula Cusolito, 2016. "The demand for, and impact of, youth internships: evidence from a randomized experiment in Yemen," IZA Journal of Labor & Development, Springer;Forschungsinstitut zur Zukunft der Arbeit GmbH (IZA), vol. 5(1), pages 1-15, December.
    15. Blattman, Christopher & Dercon, Stefan, 2016. "Occupational choice in early industrializing societies: Experimental evidence on the income and health effects of industrial and entrepreneurial work," CEPR Discussion Papers 11556, C.E.P.R. Discussion Papers.
    16. Leslie A. Martin & Shanthi Nataraj & Ann E. Harrison, 2017. "In with the Big, Out with the Small: Removing Small-Scale Reservations in India," American Economic Review, American Economic Association, vol. 107(2), pages 354-386, February.
    17. Beam, Emily A., 2016. "Do job fairs matter? Experimental evidence on the impact of job-fair attendance," Journal of Development Economics, Elsevier, vol. 120(C), pages 32-40.
    18. Abebe,Girum & Caria,Stefano & Fafchamps,Marcel & Falco,Paolo & Franklin,Simon & Quinn,Simon Redmond & Shilpi,Forhad J., 2017. "Job fairs : matching firms and workers in a field experiment in Ethiopia," Policy Research Working Paper Series 8092, The World Bank.
    19. Bruno Crépon & Gerard J. van den Berg, 2016. "Active Labor Market Policies," Annual Review of Economics, Annual Reviews, vol. 8(1), pages 521-546, October.
    20. Simon Franklin, 2015. "Location, search costs and youth unemployment: A randomized trial of transport subsidies in Ethiopia," CSAE Working Paper Series 2015-11, Centre for the Study of African Economies, University of Oxford.
    21. David Card & Jochen Kluve & Andrea Weber, 2018. "What Works? A Meta Analysis of Recent Active Labor Market Program Evaluations," Journal of the European Economic Association, European Economic Association, vol. 16(3), pages 894-931.
    22. Francisco Campos & Markus Goldstein & Laura McGorman & Ana Maria Munoz Boudet & Obert Pimhidzai, 2014. "Breaking the Metal Ceiling," World Bank Other Operational Studies 25456, The World Bank.
    23. David McKenzie & Christopher Woodruff, 2014. "What Are We Learning from Business Training and Entrepreneurship Evaluations around the Developing World?," World Bank Research Observer, World Bank Group, vol. 29(1), pages 48-82.
    24. Matthew Groh & Nandini Krishnan & David McKenzie & Tara Vishwanath, 2016. "Do Wage Subsidies Provide a Stepping-Stone to Employment for Recent College Graduates? Evidence from a Randomized Experiment in Jordan," The Review of Economics and Statistics, MIT Press, vol. 98(3), pages 488-502, July.
    25. David Card & Pablo Ibarrarán & Ferdinando Regalia & David Rosas-Shady & Yuri Soares, 2011. "The Labor Market Impacts of Youth Training in the Dominican Republic," Journal of Labor Economics, University of Chicago Press, vol. 29(2), pages 267-300.
    26. Orazio Attanasio & Adriana Kugler & Costas Meghir, 2011. "Subsidizing Vocational Training for Disadvantaged Youth in Colombia: Evidence from a Randomized Trial," American Economic Journal: Applied Economics, American Economic Association, vol. 3(3), pages 188-220, July.
    27. Matthew Groh & David McKenzie & Nour Shammout & Tara Vishwanath, 2015. "Testing the importance of search frictions and matching through a randomized experiment in Jordan," IZA Journal of Labor Economics, Springer;Forschungsinstitut zur Zukunft der Arbeit GmbH (IZA), vol. 4(1), pages 1-20, December.
    28. Maloney, William F., 2004. "Informality Revisited," World Development, Elsevier, vol. 32(7), pages 1159-1178, July.
    29. Orazio Attanasio & Arlen Guarín & Carlos Medina & Costas Meghir, 2017. "Vocational Training for Disadvantaged Youth in Colombia: A Long-Term Follow-Up," American Economic Journal: Applied Economics, American Economic Association, vol. 9(2), pages 131-143, April.
    30. World Bank, 2012. "World Development Report 2013
      [Rapport sur le développement dans le monde 2013]
      ," World Bank Publications, The World Bank, number 11843, June.
    31. Ibarrarán, Pablo & Kluve, Jochen & Ripani, Laura & Rosas Shady, David, 2015. "Experimental Evidence on the Long-Term Impacts of a Youth Training Program," IZA Discussion Papers 9136, Institute of Labor Economics (IZA).
    32. Honorati,Maddalena, 2015. "The impact of private sector internship and training on urban youth in Kenya," Policy Research Working Paper Series 7404, The World Bank.
    33. Díaz, Juan José & Rosas-Shady, David, 2016. "Impact Evaluation of the Job Youth Training Program Projoven," IDB Publications (Working Papers) 7615, Inter-American Development Bank.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Achyuta Adhvaryu & Namrata Kala & Anant Nyshadham, 2018. "The Skills to Pay the Bills: Returns to On-the-job Soft Skills Training," NBER Working Papers 24313, National Bureau of Economic Research, Inc.
    2. Michael A. Clemens & Hannah M. Postel, 2018. "Deterring Emigration with Foreign Aid: An Overview of Evidence from Low‐Income Countries," Population and Development Review, The Population Council, Inc., vol. 44(4), pages 667-693, December.
    3. repec:eee:wdevel:v:107:y:2018:i:c:p:111-124 is not listed on IDEAS
    4. Martin Abel & Rulof Burger & Eliana Carranza & Patrizio Piraino, 2019. "Bridging the Intention-Behavior Gap? The Effect of Plan-Making Prompts on Job Search and Employment," American Economic Journal: Applied Economics, American Economic Association, vol. 11(2), pages 284-301, April.
    5. Abebe, Girum & Caria, Stefano & Fafchamps, Marcel & Falco, Paolo & Franklin, Simon & Quinn, Simon & Shilpi, Forhad, 2017. "Matching firms and workers in a field experiment in Ethiopia," LSE Research Online Documents on Economics 86572, London School of Economics and Political Science, LSE Library.
    6. repec:wbk:wbpubs:30435 is not listed on IDEAS
    7. Martin Abel & Rulof Burger & Patrizio Piraino, 2017. "The value of reference letters," Working Papers 06/2017, Stellenbosch University, Department of Economics.
    8. repec:zbw:ifweej:201853 is not listed on IDEAS
    9. Chakravarty, Shubha & Lundberg, Mattias & Nikolov, Plamen & Zenker, Juliane, 2019. "Vocational training programs and youth labor market outcomes: Evidence from Nepal," Journal of Development Economics, Elsevier, vol. 136(C), pages 71-110.
    10. repec:spr:izamig:v:8:y:2018:i:1:d:10.1186_s40176-018-0131-9 is not listed on IDEAS
    11. Brown, Annette N. & Wood, Benjamin Douglas Kuflick, 2018. "Which tests not witch hunts: A diagnostic approach for conducting replication research," Economics - The Open-Access, Open-Assessment E-Journal, Kiel Institute for the World Economy (IfW), vol. 12, pages 1-26.
    12. repec:gam:jsusta:v:10:y:2018:i:10:p:3623-:d:174744 is not listed on IDEAS
    13. Chakravarty, Shubha & Lundberg, Mattias & Nikolov, Plamen & Zenker, Juliane, 2019. "Vocational training programs and youth labor market outcomes: Evidence from Nepal," Journal of Development Economics, Elsevier, vol. 136(C), pages 71-110.
    14. Abebe, Girum & Caria, Stefano & Fafchamps, Marcel & Falco, Paolo & Franklin, Simon & Quinn, Simon, 2017. "Anonymity of distance? Job search and labour market exclusion in a growing African city," LSE Research Online Documents on Economics 86573, London School of Economics and Political Science, LSE Library.
    15. Nina Pavcnik, 2017. "The Impact of Trade on Inequality in Developing Countries," NBER Working Papers 23878, National Bureau of Economic Research, Inc.
    16. Livia Alfonsi & Oriana Bandiera & Vittorio Bassi & Robin Burgess & Imran Rasul & Munshi Sulaiman & Anna Vitali, 2017. "Tackling Youth Unemployment: Evidence from a Labour Market Experiment in Uganda," STICERD - Development Economics Papers - From 2008 this series has been superseded by Economic Organisation and Public Policy Discussion Papers eopp64, Suntory and Toyota International Centres for Economics and Related Disciplines, LSE.
    17. Fletcher, Erin K. & Pande, Rohini & Troyer Moore, Charity, 2017. "Women and Work in India: Descriptive Evidence and a Review of Potential Policies," Working Paper Series rwp18-004, Harvard University, John F. Kennedy School of Government.
    18. Abebe, Girum & Caria, Stefano & Fafchamps, Marcel & Falco, Paolo & Franklin, Simon & Quinn, Simon, 2017. "Anonymity of distance? Job search and labour market exclusion in a growing African city," LSE Research Online Documents on Economics 86573, London School of Economics and Political Science, LSE Library.
    19. Eduardo Levy Yeyati, 2019. "What Works for Active Labor Market Policies?," CID Working Papers 358, Center for International Development at Harvard University.
    20. Battaglia, Marianna & Gulesci, Selim & Madestam, Andreas, 2018. "Repayment Flexibility and Risk Taking: Experimental Evidence from Credit Contracts," CEPR Discussion Papers 13329, C.E.P.R. Discussion Papers.
    21. Sarah Baird & David McKenzie & Berk Özler, 2018. "The effects of cash transfers on adult labor market outcomes," IZA Journal of Migration and Development, Springer;Forschungsinstitut zur Zukunft der Arbeit GmbH (IZA), vol. 8(1), pages 1-20, December.
    22. Robertson, Raymond & Halliday, Timothy J. & Vasireddy, Sindhu, 2018. "Labor Market Adjustment to Third Party Competition: Evidence from Mexico," IZA Discussion Papers 12002, Institute of Labor Economics (IZA).
    23. Araya, Federico & Le Barbanchon, Thomas & Ubfal, Diego, 2019. "The Effects of Working while in School: Evidence from Uruguayan Lotteries," CEPR Discussion Papers 13826, C.E.P.R. Discussion Papers.
    24. Stöterau, Jonathan, 2019. "Job training programs for youth in low-income countries," PEGNet Policy Briefs 15/2019, PEGNet - Poverty Reduction, Equity and Growth Network, Kiel Institute for the World Economy (IfW).

    More about this item

    Keywords

    Active Labor Market Policy; Jobs; Wage Subsidies; Vocational Training; Job Search.;

    JEL classification:

    • J08 - Labor and Demographic Economics - - General - - - Labor Economics Policies
    • J68 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Public Policy
    • O15 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Economic Development: Human Resources; Human Development; Income Distribution; Migration

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:cpr:ceprdp:11923. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (). General contact details of provider: .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.