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What Did All the Money Do? On the General Ineffectiveness of Recent West German Labour Market Programmes

  • Lechner, Michael
  • Wunsch, Conny

We provide new evidence on the effectiveness of West German labour market programmes by evaluating training and employment programmes that have been conducted 2000-2002 after the first large reform of German labour market policy in 1998. We employ exceptionally rich administrative data that allow us to use microeconometric matching methods and to estimate interesting effects for different types of programmes and participants at a rather disaggregated level. We find that, on average, all programmes fail to improve their participants' chances of finding regular, unsubsidised employment. Rather, participants accumulate 2-13 more months of unemployment than nonparticipants over the 2.5 years following programme start, which, in addition to direct programme costs, induces net costs in terms of benefit payments and wage subsidies amounting to, on average, 1500-7000 EUR per participant. However, we show that there is some scope for improvements in mean employment rates as well as potential for considerable cost savings by a reallocation of participants and nonparticipants to the different programmes.

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Paper provided by C.E.P.R. Discussion Papers in its series CEPR Discussion Papers with number 6306.

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Date of creation: May 2007
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Handle: RePEc:cpr:ceprdp:6306
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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. Fitzenberger, Bernd & Speckesser, Stefan, 2005. "Employment Effects of the Provision of Specific Professional Skills and Techniques in Germany," IZA Discussion Papers 1868, Institute for the Study of Labor (IZA).
  3. 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.
  4. Winter-Ebmer, Rudolf, 2001. "Evaluating an Innovative Redundancy-Retraining Project: The Austrian Steel Foundation," IZA Discussion Papers 277, Institute for the Study of Labor (IZA).
  5. Caliendo, Marco & Hujer, Reinhard & Thomsen, Stephan L., 2005. "The Employment Effects of Job Creation Schemes in Germany: A Microeconometric Evaluation," IZA Discussion Papers 1512, Institute for the Study of Labor (IZA).
  6. V. Joseph Hotz & Guido W. Imbens & Jacob A. Klerman, 2000. "The Long-Term Gains from GAIN: A Re-Analysis of the Impacts of the California GAIN Program," NBER Working Papers 8007, National Bureau of Economic Research, Inc.
  7. Frölich, Markus & Lechner, Michael & Steiger, Heidi, 2003. "Statistically assisted programme selection - International experiences and potential benefits for Switzerland," Working Paper Series 2004:1, IFAU - Institute for Evaluation of Labour Market and Education Policy.
  8. Hujer, Reinhard & Caliendo, Marco & Thomsen, Stephan L., 2003. "New Evidence on the Effects of Job Creation Schemes in Germany - A Matching Approach with Threefold Heterogeneity," IZA Discussion Papers 750, Institute for the Study of Labor (IZA).
  9. Alberto Abadie & Guido W. Imbens, 2006. "Large Sample Properties of Matching Estimators for Average Treatment Effects," Econometrica, Econometric Society, vol. 74(1), pages 235-267, 01.
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