The Portuguese Active Labour Market Policy During The Period 1998-2003 - A Comprehensive Conditional Difference-In-Differences Application

In most studies in the literature only the participation in a single programme versus non-participation is evaluated. This approach, however, does not address the needs of a comprehensive evaluation of an active public intervention in the labour market. Active labour market programmes, like the Portuguese, are not restricted to a particular measure. Rather, in most cases, the public employment service offers a wide variety of programmes to the universe of potential participants. In this context, the issue is participation in one programme versus participation in an alternative programme. In particular, it is appropriate to investigate which programme presents a higher causal effect. Imbens (2000) and Lechner (2001) extended the traditional matching methodology to a context of multiple programme participation. The approach followed in this paper intends to go even further. Indeed, since the traditional matching methodology, which considers the conditional independence assumption, is not appropriate in the context of the Portuguese labour market analysis, we will adopt the assumption of the bias stability. Taking into consideration the selection on unobservables, the matching methodology, combined with the difference-in-differences methodology, will be then our selected evaluation approach. The paper presents the estimation of the average treatment effects on the treated in six distinct states (the non-participation state, plus five “active” programmes). The results, in terms of employability, are not identical across the different states in the short-run (i.e. in the first six to twelve months after participation), but they do seem to converge in the long-run (i.e. after two and a half years).