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Does Subsidized Temporary Employment Get the Unemployed Back to Work? An Econometric Analysis of Two Different Schemes

  • Gerfin, Michael
  • Lechner, Michael
  • Stieger, Heidi

Subsidized employment is an important tool of active labour market policies to improve the chances of the unemployed to find permanent employment. Using informative individual administrative data, we investigate the effects of two different schemes of subsidized temporary employment implemented in Switzerland. One scheme operates as a non-profit employment programme (EP), whereas the other one is a subsidy for temporary jobs (TEMP) in firms operating in competitive markets. Using econometric matching methods, we find that TEMP is considerably more successful in getting the unemployed back into work than EP. We also find that, compared to non-participation, both programmes are ineffective for unemployed who find jobs easily anyway, as well as for those with short unemployment duration. For unemployed with potentially long unemployment duration and for actual long term unemployed, both programmes may have positive effects, but the effect of TEMP is much larger.

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Paper provided by C.E.P.R. Discussion Papers in its series CEPR Discussion Papers with number 3669.

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Date of creation: Dec 2002
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Handle: RePEc:cpr:ceprdp:3669
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  1. Michael Gerfin & Michael Lechner, 2002. "A Microeconometric Evaluation of the Active Labour Market Policy in Switzerland," Economic Journal, Royal Economic Society, vol. 112(482), pages 854-893, October.
  2. Rafael Lalive & Jan C. van Ours & Josef Zweimueller, . "The Impact of Active Labor Market Programs on the Duration of Unemployment," IEW - Working Papers 041, Institute for Empirical Research in Economics - University of Zurich.
  3. 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).
  4. Albert Ma, C.T. & Weiss, A.M., 1991. "A Signaling Theory of Unemployment," Papers 7, Boston University - Department of Economics.
  5. Brian Bell & Richard Blundell & John Reenen, 1999. "Getting the Unemployed Back to Work: The Role of Targeted Wage Subsidies," International Tax and Public Finance, Springer, vol. 6(3), pages 339-360, August.
  6. Lawrence F. Katz, 1996. "Wage Subsidies for the Disadvantaged," NBER Working Papers 5679, National Bureau of Economic Research, Inc.
  7. Michael Lechner, 2002. "Some practical issues in the evaluation of heterogeneous labour market programmes by matching methods," Journal of the Royal Statistical Society Series A, Royal Statistical Society, vol. 165(1), pages 59-82.
  8. Woodbury, Stephen A & Spiegelman, Robert G, 1987. "Bonuses to Workers and Employers to Reduce Unemployment: Randomized Trials in Illinois," American Economic Review, American Economic Association, vol. 77(4), pages 513-30, September.
  9. 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.
  10. Geweke, John & Keane, Michael P & Runkle, David, 1994. "Alternative Computational Approaches to Inference in the Multinomial Probit Model," The Review of Economics and Statistics, MIT Press, vol. 76(4), pages 609-32, November.
  11. Michael Lechner, 2000. "Programme Heterogeneity and Propensity Score Matching: An Application to the Evaluation of Active Labour Market Policies," Econometric Society World Congress 2000 Contributed Papers 0647, Econometric Society.
  12. Gary Burtless, 1985. "Are targeted wage subsidies harmful? Evidence from a wage voucher experiment," Industrial and Labor Relations Review, ILR Review, Cornell University, ILR School, vol. 39(1), pages 105-114, October.
  13. Vassilis A. Hajivassiliou & Axel Borsch-Supan, 1990. "Smooth Unbiased Multivariate Probability Simulators for Maximum Likelihood Estimation of Limited Dependent Variable Models," Cowles Foundation Discussion Papers 960, Cowles Foundation for Research in Economics, Yale University.
  14. Heckman, James J & Ichimura, Hidehiko & Todd, Petra, 1998. "Matching as an Econometric Evaluation Estimator," Review of Economic Studies, Wiley Blackwell, vol. 65(2), pages 261-94, April.
  15. Carling, Kenneth & Richardson, Katarina, 2004. "The relative efficiency of labor market programs: Swedish experience from the 1990s," Labour Economics, Elsevier, vol. 11(3), pages 335-354, June.
  16. Carling, Kenneth & Richardson, Katarina, 2001. "The relative efficiency of labor market programs: Swedish experience from the 1990's," Working Paper Series 2001:2, IFAU - Institute for Evaluation of Labour Market and Education Policy.
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