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Do public works programs work? Some unpleasant results from the East German experience

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  • Kraus, Florian
  • Puhani, Patrick A.
  • Steiner, Viktor

Abstract

We analyze the effectiveness of public works programs (PWP, Arbeitsbeschaffungsmaßnahmen) in east Germany as measured by their effects on individual future reemployment probabilities in regular jobs. These are estimated by discrete hazard rate models on the basis of individual?level panel data. We account for unobserved individual heterogeneity in both the PWP participation and in the outcome equations. In the latter, we differentiate between transitions into "stable" and "unstable" employment after the PWP. We find that these programs seem to have no special targeting focus on disadvantaged groups in the labor market and that participants are, on average, worse off concerning their re?employment prospects in regular jobs than unemployed people who do not join such a program. A possible explanation for this result is that PWP participants search less intensively for a regular job while on such a program than unemployed non-participants. Thus, our results cast serious doubts on both the effectiveness and the equity aspects of public works programs in east Germany.

Suggested Citation

  • Kraus, Florian & Puhani, Patrick A. & Steiner, Viktor, 1998. "Do public works programs work? Some unpleasant results from the East German experience," ZEW Discussion Papers 98-07, ZEW - Zentrum für Europäische Wirtschaftsforschung / Center for European Economic Research.
  • Handle: RePEc:zbw:zewdip:5180
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    1. James J. Heckman & Hidehiko Ichimura & Petra E. Todd, 1997. "Matching As An Econometric Evaluation Estimator: Evidence from Evaluating a Job Training Programme," Review of Economic Studies, Oxford University Press, vol. 64(4), pages 605-654.
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    5. Kraus, Florian & Puhani, Patrick A. & Steiner, Viktor, 1997. "Employment Effects of Publicly Financed Training Programs The East German Experience," ZEW Discussion Papers 97-33, ZEW - Zentrum für Europäische Wirtschaftsforschung / Center for European Economic Research.
    6. Zweimuller, Josef & Winter-Ebmer, Rudolf, 1996. "Manpower Training Programmes and Employment Stability," Economica, London School of Economics and Political Science, vol. 63(249), pages 113-130, February.
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    Cited by:

    1. Lechner, Michael & Wunsch, Conny, 2006. "Active Labour Market Policy in East Germany: Waiting for the Economy to Take Off," CEPR Discussion Papers 5924, C.E.P.R. Discussion Papers.
    2. repec:iab:iabzaf:v:39:i:3/4:p:329-345 is not listed on IDEAS
    3. Norbert Berthold, 2005. "Mehr Effizienz und Gerechtigkeit: Wege zur Entflechtung des Sozialstaates," Perspektiven der Wirtschaftspolitik, Verein für Socialpolitik, vol. 6(2), pages 233-254, May.
    4. Hujer, Reinhard & Thomsen, Stephan L., 2006. "Wirksamkeit von Arbeitsbeschaffungsmaßnahmen in Deutschland: Empirische Befunde mikroökonometrischer Analysen," ZEW Discussion Papers 06-054, ZEW - Zentrum für Europäische Wirtschaftsforschung / Center for European Economic Research.
    5. Sabine Engelmann & Beate Schirwitz & Marcel Thum, 2009. "Erstellung von Unbedenklichkeitsbescheinigungen im Bereich der öffentlich geförderten Beschäftigung," ifo Dresden Studien, ifo Institute - Leibniz Institute for Economic Research at the University of Munich, number 47, October.
    6. Wolff, Joachim, 2004. "The Duration of New Job Matches in East and West Germany," Discussion Papers in Economics 360, University of Munich, Department of Economics.
    7. Eichler, Martin & Lechner, Michael, 2002. "An evaluation of public employment programmes in the East German State of Sachsen-Anhalt," Labour Economics, Elsevier, vol. 9(2), pages 143-186, April.
    8. Michael White and Genevieve Knight, 2003. "Benchmarking the effectiveness of NDYP: A review of European and US literature on the microeconomic effects of labour market programmes for young people," PSI Research Discussion Series 10, Policy Studies Institute, UK.
    9. Wolfgang Franz & Viktor Steiner, 2000. "Wages in the East German Transition Process: Facts and Explanations," German Economic Review, Verein für Socialpolitik, vol. 1(3), pages 241-269, August.
    10. Fitzenberger, Bernd & Speckesser, Stefan, 2000. "Zur wissenschaftlichen Evaluation der aktiven Arbeitsmarktpolitik in Deutschland: Ein Überblick," ZEW Discussion Papers 00-06, ZEW - Zentrum für Europäische Wirtschaftsforschung / Center for European Economic Research.
    11. Caliendo Marco & Hujer Reinhard & Thomsen Stephan L., 2006. "Sectoral Heterogeneity in the Employment Effects of Job Creation Schemes in Germany," Journal of Economics and Statistics (Jahrbuecher fuer Nationaloekonomie und Statistik), De Gruyter, vol. 226(2), pages 139-179, April.
    12. Norbert Berthold & Rainer Fehn, 2003. "Unemployment in Germany: Reasons and Remedies," CESifo Working Paper Series 871, CESifo Group Munich.
    13. Horst Feldmann, 2002. "Labour Market Policies in Transition: Lessons from East Germany," Post-Communist Economies, Taylor & Francis Journals, vol. 14(1), pages 47-84.
    14. Brinkmann, Christian & Caliendo, Marco & Hujer, Reinhard & Thomsen, Stephan L., 2006. "Zielgruppenspezifische Evaluation von Arbeitsbeschaffungsmaßnahmen : Gewinner und Verlierer," IAB-Forschungsbericht 200605, Institut für Arbeitsmarkt- und Berufsforschung (IAB), Nürnberg [Institute for Employment Research, Nuremberg, Germany].
    15. Horst Feldmann, 2001. "Transformation in Ostdeutschland: Hat die Arbeitsmarktpolitik den Betroffenen geholfen?," Perspektiven der Wirtschaftspolitik, Verein für Socialpolitik, vol. 2(3), pages 259-278, August.
    16. Rabe, Birgitta, 2000. "Wirkungen aktiver Arbeitsmarktpolitik: Evaluierungsergebnisse für Deutschland, Schweden, Dänemark und die Niederlande," Discussion Papers, Research Unit: Labor Market Policy and Employment FS I 00-208, Social Science Research Center Berlin (WZB).
    17. Martin Eichler & Michael Lechner, 2000. "Some Econometric Evidence on the Effectiveness of Active Labour Market Programmes in East Germany," William Davidson Institute Working Papers Series 318, William Davidson Institute at the University of Michigan.

    More about this item

    Keywords

    public works programs; evaluation studies; employment effects; sample selection; east Germany;

    JEL classification:

    • J68 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Public Policy
    • J64 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Unemployment: Models, Duration, Incidence, and Job Search

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