When Active Labor Market Policies Increase Unemployment: An Assessment of The Impact of The Employment Agencies Program in Algeria

This paper examines the impact on labor force behavior of the employment agencies program adopted by the Algerian government in 2008. Using pooled cross-sectional labor force survey data on employment and unemployment from 2004 to 2014, we estimate a two-way fixed effects difference-in-difference model with geographic access to an employment agency as the treatment variable. Our findings indicate that access to an employment agency reduces the rate of transition from unemployment to employment and the rate of transition from out of the labor force to employment for both male and females. The impact is more pronounced for older workers and for more educated workers. The program has a positive and significant effect on women’s labor force participation, but much of that effect is through increased unemployment rather than employment. We attribute these results to job seekers using registration at an employment agency to queue for public sector jobs that make up the majority of jobs available through the employment agencies