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

Listed author(s):
  • McKenzie, David

    ()

    (World Bank)

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.

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Paper provided by Institute for the Study of Labor (IZA) in its series IZA Discussion Papers with number 10655.

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Length: 32 pages
Date of creation: Mar 2017
Handle: RePEc:iza:izadps:dp10655
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  1. 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.
  2. 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.
  3. 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.
  4. Crépon, Bruno & van den Berg, Gerard J., 2016. "Active Labor Market Policies," IZA Discussion Papers 10321, Institute for the Study of Labor (IZA).
  5. 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.
  6. 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.
  7. 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.
  8. 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.
  9. 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.
  10. 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.
  11. 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.
  12. 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.
  13. Maloney, William F., 2004. "Informality Revisited," World Development, Elsevier, vol. 32(7), pages 1159-1178, July.
  14. 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 for the Study of Labor (IZA).
  15. 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.
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