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Reemployment and Substitution Effects from Increased Activation: Evidence from Times of Crisis

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  • Pedro S. Martins
  • Sofia Pessoa e Costa

Abstract

Although activation services such as monitoring, training, or job subsidies have been shown to increase exits from unemployment, there is little comprehensive evidence about the effects of activation during recessions. Here we evaluate a large activation programme introduced in Portugal in 2012, a time of very high unemployment. This programme required specific unemployment benefit recipients to meet jobcentre caseworkers and then participate in active labour market policies. Our analysis draws on rich longitudinal data, the programme's focus on those unemployed for at least six months, and fuzzy regression discontinuity methods. We find that, despite the weak labour market, the programme is very successful as it doubles the monthly reemployment probability. The results are robust to a number of checks, including a falsification exercise based on pre-programme data and an analysis of non-employment and income effects. Moreover, in a novel IV approach using information on all unemployed, we find no evidence of substitution effects such as decreased transitions to employment amongst non-eligible individuals. JEL codes: J64, J68, J22

Suggested Citation

  • Pedro S. Martins & Sofia Pessoa e Costa, 2014. "Reemployment and Substitution Effects from Increased Activation: Evidence from Times of Crisis," FEUNL Working Paper Series wp590, Universidade Nova de Lisboa, Faculdade de Economia.
  • Handle: RePEc:unl:unlfep:wp590
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    References listed on IDEAS

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    Citations

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    Cited by:

    1. Pedro S. Martins, 2015. "Working to get fired? Regression discontinuity effects of unemployment benefit eligibility on prior employment duration," Working Papers 61, Queen Mary, University of London, School of Business and Management, Centre for Globalisation Research.
    2. Pedro S. Martins, 2016. "Can overtime premium flexibility promote employment? Firm- and worker-level evidence from a labour law reform," Working Papers 72, Queen Mary, University of London, School of Business and Management, Centre for Globalisation Research.
    3. Martins, Pedro S., 2016. "Should the Maximum Duration of Fixed-Term Contracts Increase in Recessions? Evidence from a Law Reform," IZA Discussion Papers 10206, Institute for the Study of Labor (IZA).
    4. Danula K. Gamage & Pedro S. Martins, 2018. "Evaluating Public-Private Partnerships in Employment Services: The Case of the UK Work Programme," Working Papers 87, Queen Mary, University of London, School of Business and Management, Centre for Globalisation Research.
    5. Peter Mueser & Marios Michaelides, 2017. "The Labor Market Effects of U.S. Reemployment Policy: Lessons from an Analysis of Four Programs during the Great Recession," Working Papers 18-05, Department of Economics, University of Missouri.
    6. Kluve, Jochen., 2016. "A review of the effectiveness of active labour market programmes with a focus on Latin America and the Caribbean," ILO Working Papers 994901193402676, International Labour Organization.
    7. Pedro S. Martins, 2016. "Employment Resilience through Services Exports? Evidence from Matched Employer-Employee Data," Working Papers 79, Queen Mary, University of London, School of Business and Management, Centre for Globalisation Research.
    8. Dayanand S. Manoli & Marios Michaelides & Ankur Patel, 2018. "Long-Term Effects of Job-Search Assistance: Experimental Evidence Using Administrative Tax Data," NBER Working Papers 24422, National Bureau of Economic Research, Inc.
    9. Martins, Pedro S., 2017. "Economic effects of overtime premium flexibility: Firm- and worker-level evidence from a law reform," GLO Discussion Paper Series 102, Global Labor Organization (GLO).

    More about this item

    Keywords

    Public employment services; job search; public policy evaluation;

    JEL classification:

    • J64 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Unemployment: Models, Duration, Incidence, and Job Search
    • J68 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Public Policy
    • J22 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Time Allocation and Labor Supply

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