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Labor Market Policy Evaluation in Equilibrium: Some Lessons of the Job Search and Matching Model

  • Pierre Cahuc

    (Department of Economics, Ecole Polytechnique - Polytechnique - X - CNRS, CREST - Centre de Recherche en Économie et Statistique - INSEE - École Nationale de la Statistique et de l'Administration Économique, Center for Economic Research - CEPR, IZA - Institute for the Study of Labor)

  • Thomas Le Barbanchon

    (CREST - Centre de Recherche en Économie et Statistique - INSEE - École Nationale de la Statistique et de l'Administration Économique, Unité de gestion de la direction de l'action régionale et des relations avec l'enseignement supérieur (DARES) - Institut national de la recherche agronomique (INRA))

We analyze the consequences of counseling provided to job seekers in a standard job search and matching model. It turns out that neglecting equilibrium effects induced by counseling can lead to wrong conclusions. In particular, counseling can increase steady state unemployment although counseled job seekers exit unemployment at a higher rate than the noncounseled. Dynamic analysis shows that permanent and transitory policies can have effects of opposite sign on unemployment.

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Date of creation: 17 Jun 2009
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Handle: RePEc:hal:wpaper:hal-00396295
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  1. van den Berg, Gerard J & van der Klaauw, Bas, 2001. "Counselling and Monitoring of Unemployed Workers: Theory and Evidence from a Controlled Social Experiment," CEPR Discussion Papers 2986, C.E.P.R. Discussion Papers.
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  4. Albrecht, James & van den Berg, Gerard J. & Vroman, Susan, 2005. "The Knowledge Lift: The Swedish Adult Education Program That Aimed to Eliminate Low Worker Skill Levels," IZA Discussion Papers 1503, Institute for the Study of Labor (IZA).
  5. Jeremy Lise & Shannon Seitz & Jeffrey Smith, 2003. "Equilibrium Policy Experiments and the Evaluation of Social Programs," Working Papers 1012, Queen's University, Department of Economics.
  6. Pissarides, C A, 1979. "Job Matchings with State Employment Agencies and Random Search," Economic Journal, Royal Economic Society, vol. 89(356), pages 818-33, December.
  7. Crépon, Bruno & Dejemeppe, Muriel & Gurgand, Marc, 2005. "Counseling the Unemployed: Does It Lower Unemployment Duration and Recurrence?," IZA Discussion Papers 1796, Institute for the Study of Labor (IZA).
  8. Boone, J. & Fredriksson, P. & Holmlund, B. & van Ours, J.C., 2007. "Optimal unemployment insurance with monitoring and sanctions," Other publications TiSEM f2b1b916-41f5-4964-bad8-3, Tilburg University, School of Economics and Management.
  9. Masters, Adrian, 2000. "Retraining the Unemployed in a Model of Equilibrium Employment," Bulletin of Economic Research, Wiley Blackwell, vol. 52(4), pages 323-40, October.
  10. Heckman, James J & Lochner, Lance & Taber, Christopher, 1998. "General-Equilibrium Treatment Effects: A Study of Tuition Policy," American Economic Review, American Economic Association, vol. 88(2), pages 381-86, May.
  11. Pierre Cahuc & François Fontaine, 2009. "On the Efficiency of Job Search with Social Networks," Journal of Public Economic Theory, Association for Public Economic Theory, vol. 11(3), pages 411-439, 06.
  12. Bruno, VAN DER LINDEN, 2005. "Equilibrium Evaluation of Active Labor Market Programmes Enhancing Matching Effectiveness," Discussion Papers (ECON - Département des Sciences Economiques) 2005007, Université catholique de Louvain, Département des Sciences Economiques.
  13. Malcomson, J., 1998. "Individual employment contracts," Discussion Paper Series In Economics And Econometrics 9804, Economics Division, School of Social Sciences, University of Southampton.
  14. Christopher A. Pissarides, 2000. "Equilibrium Unemployment Theory, 2nd Edition," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262161877, December.
  15. Richard Blundell & Monica Costa Dias & Costas Meghir & John Van Reenen, 2004. "Evaluating the Employment Impact of a Mandatory Job Search Program," Journal of the European Economic Association, MIT Press, vol. 2(4), pages 569-606, 06.
  16. Costas Meghir, 2006. "Dynamic models for policy evaluation," IFS Working Papers W06/08, Institute for Fiscal Studies.
  17. Jaap H. Abbring & Gerard J. van den Berg, 2003. "The Nonparametric Identification of Treatment Effects in Duration Models," Econometrica, Econometric Society, vol. 71(5), pages 1491-1517, 09.
  18. James J. Heckman & Jeffrey A. Smith, 1998. "Evaluating the Welfare State," NBER Working Papers 6542, National Bureau of Economic Research, Inc.
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