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Exploiting Regional Treatment Intensity for the Evaluation of Labour Market Policies

  • Frölich, Markus

    ()

    (University of Mannheim)

  • Lechner, Michael

    ()

    (University of St. Gallen)

We estimate the effects of active labour market policies (ALMP) on subsequent employment by nonparametric instrumental variables and matching estimators. Very informative administrative Swiss data with detailed regional information are combined with exogenous regional variation in programme participation probabilities, which generate an instrument within well-defined local labour markets. This allows pursuing instrumental variable as well as matching estimation strategies. A specific combination of those methods identifies a new type of effect heterogeneity. We find that ALMP increases individual employment probabilities by about 15% in the short term for unemployed that may be called 'marginal' participants. The effects seem to be considerably smaller for those unemployed not marginal to the participation decision.

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Paper provided by Institute for the Study of Labor (IZA) in its series IZA Discussion Papers with number 2144.

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Length: 55 pages
Date of creation: May 2006
Date of revision:
Publication status: published in: Journal of American Statistical Association, 2010, 105 (491), 1014-1029
Handle: RePEc:iza:izadps:dp2144
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  1. Lechner, Michael, 1999. "Earnings and Employment Effects of Continuous Off-the-Job Training in East Germany after Unification," Journal of Business & Economic Statistics, American Statistical Association, vol. 17(1), pages 74-90, January.
  2. Guido W. Imbens, 2003. "Nonparametric Estimation of Average Treatment Effects under Exogeneity: A Review," NBER Technical Working Papers 0294, National Bureau of Economic Research, Inc.
  3. Imbens, Guido W & Angrist, Joshua D, 1994. "Identification and Estimation of Local Average Treatment Effects," Econometrica, Econometric Society, vol. 62(2), pages 467-75, March.
  4. Michael Lechner & Jeffrey Smith, 2003. "What is the Value Added by Caseworkers?," University of Western Ontario, CIBC Centre for Human Capital and Productivity Working Papers 20031, University of Western Ontario, CIBC Centre for Human Capital and Productivity.
  5. Michael Gerfin & Michael Lechner & Heidi Steiger, 2002. "Does subsidised temporary employment get the unemployed back to work? An econometric analysis of two different schemes," University of St. Gallen Department of Economics working paper series 2002 2002-22, Department of Economics, University of St. Gallen.
  6. Thomas J. Holmes, 1998. "The Effect of State Policies on the Location of Manufacturing: Evidence from State Borders," Journal of Political Economy, University of Chicago Press, vol. 106(4), pages 667-705, August.
  7. 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.
  8. David Card & Alan B. Krueger, 1993. "Minimum Wages and Employment: A Case Study of the Fast Food Industry in New Jersey and Pennsylvania," NBER Working Papers 4509, National Bureau of Economic Research, Inc.
  9. Frölich, Markus, 2006. "A Note on Parametric and Nonparametric Regression in the Presence of Endogenous Control Variables," IZA Discussion Papers 2126, Institute for the Study of Labor (IZA).
  10. Lechner, Michael & Miquel, Ruth & Wunsch, Conny, 2005. "Long-run effects of public sector sponsored training in West Germany," IAB Discussion Paper 200503, Institut für Arbeitsmarkt- und Berufsforschung (IAB), Nürnberg [Institute for Employment Research, Nuremberg, Germany].
  11. Sandra E. Black, 1997. "Do better schools matter? Parental valuation of elementary education," Research Paper 9729, Federal Reserve Bank of New York.
  12. Kluve, Jochen, 2006. "The Effectiveness of European Active Labor Market Policy," IZA Discussion Papers 2018, Institute for the Study of Labor (IZA).
  13. 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.
  14. Markus Froelich, 2002. "Nonparametric IV estimation of local average treatment effects with covariates," University of St. Gallen Department of Economics working paper series 2002 2002-19, Department of Economics, University of St. Gallen.
  15. Donald, Stephen G. & Whitney Newey, 1999. "Choosing the Number of Instruments," Working papers 99-05, Massachusetts Institute of Technology (MIT), Department of Economics.
  16. Jochen Kluve & Christoph M. Schmidt, 2002. "Can training and employment subsidies combat European unemployment?," Economic Policy, CEPR;CES;MSH, vol. 17(35), pages 409-448, October.
  17. Nelson, Charles R & Startz, Richard, 1990. "Some Further Results on the Exact Small Sample Properties of the Instrumental Variable Estimator," Econometrica, Econometric Society, vol. 58(4), pages 967-76, July.
  18. Jinyong Hahn & Jerry Hausman, 2003. "Weak Instruments: Diagnosis and Cures in Empirical Econometrics," American Economic Review, American Economic Association, vol. 93(2), pages 118-125, May.
  19. Kenneth L. Judd, 1998. "Numerical Methods in Economics," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262100711, June.
  20. 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.
  21. Hahn, Jinyong & Todd, Petra & Van der Klaauw, Wilbert, 2001. "Identification and Estimation of Treatment Effects with a Regression-Discontinuity Design," Econometrica, Econometric Society, vol. 69(1), pages 201-09, January.
  22. 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).
  23. 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.
  24. Markus Frölich, 2004. "Finite-Sample Properties of Propensity-Score Matching and Weighting Estimators," The Review of Economics and Statistics, MIT Press, vol. 86(1), pages 77-90, February.
  25. repec:cup:cbooks:9780521848053 is not listed on IDEAS
  26. Martin, John P. & Grubb, David, 2001. "What works and for whom: a review of OECD countries' experiences with active labour market policies," Working Paper Series 2001:14, IFAU - Institute for Evaluation of Labour Market and Education Policy.
  27. Karen M. Pence, 2003. "Foreclosing on opportunity: state laws and mortgage credit," Finance and Economics Discussion Series 2003-16, Board of Governors of the Federal Reserve System (U.S.).
  28. Fuller, Wayne A, 1977. "Some Properties of a Modification of the Limited Information Estimator," Econometrica, Econometric Society, vol. 45(4), pages 939-53, May.
  29. Robert G. Fay, 1996. "Enhancing the Effectiveness of Active Labour Market Policies: Evidence from Programme Evaluations in OECD Countries," OECD Labour Market and Social Policy Occasional Papers 18, OECD Publishing.
  30. Jinyong Hahn & Jerry Hausman & Guido Kuersteiner, 2004. "Estimation with weak instruments: Accuracy of higher-order bias and MSE approximations," Econometrics Journal, Royal Economic Society, vol. 7(1), pages 272-306, 06.
  31. Buse, A, 1992. "The Bias of Instrumental Variable Estimators," Econometrica, Econometric Society, vol. 60(1), pages 173-80, January.
  32. Maddala, G S & Jeong, Jinook, 1992. "On the Exact Small Sample Distribution of the Instrumental Variable Estimator," Econometrica, Econometric Society, vol. 60(1), pages 181-83, January.
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