Optimal Use of Labor Market Policies: The Role of Job Search Assistance

This paper studies the role of job search assistance programs in optimal welfare-to-work programs. The analysis is based on a framework, that allows for endogenous choice of benefit types and levels, wage taxes or subsidies, and activation measures such as monitoring and job search assistance for each period of unemployment in a dynamic environment with negative duration dependence in the exit rates to employment and potential depreciation in reemployment wages. We show that the main role of job search assistance is to delay or prevent situations in which it is no longer optimal to incentivize the worker to provide positive search effort. It is used to restore or maintain some minimum exit rate to employment which increases with the cost-effectiveness of job search assistance. We also find that in line with existing policies, these programs should mainly be used at the beginning of unemployment and for short durations. However, contrary to existing schemes, they should be exclusively targeted at unemployed workers with low initial exit rates to employment. For all other workers, they should only be used if they fail to find a job within reasonable time despite high expected initial exit rates.job search, optimal unemployment insurance, welfare-to-work policies, recursive contracts

Optimal Use of Labour Market Policies

Labour market policies for the unemployed combine passive income support with active measures that aim at improving jobseekers' employment prospects. This paper extends the theoretical framework developed by Pavoni and Violante (2005a) for the optimal choice between different active and passive policies for the unemployed to a setting which allows for the use of a job search assistance programme that affects the exit rate to employment by raising search effectiveness but not productivity in the job. These programmes are one of the most widely used activation measures in OECD countries and should, therefore, be taken into account when considering the optimal design of labour market policies. The enriched model allows to answer a wide range of interesting policy questions. It is used to assess the optimality of the West German policy in the period 2000-2002 as well as the benefits from introducing tight monitoring. It is shown that sizeable budget savings could have been realised by switching to the optimal scheme, but that the net gains from monitoring are only small. In addition, some interesting results on the optimal use of job search assistance and training are derived. It is shown that existing policies already share some but not all features of the optimal scheme.Unemployment insurance, active labour market policies, recursive contracts, job search, human capital

Optimal Use of Labor Market Policies: The Role of Job Search Assistance

This paper studies the role of job search assistance programs in optimal welfare-to-work programs. The analysis is based on a framework, that allows for endogenous choice of benefit types and levels, wage taxes or subsidies, and activation measures such as monitoring and job search assistance for each period of unemployment in a dynamic environment with negative duration dependence in the exit rates to employment and potential depreciation in reemployment wages. We show that the main role of job search assistance is to delay or prevent situations in which it is no longer optimal to incentivize the worker to provide positive search effort. It is used to restore or maintain some minimum exit rate to employment which increases with the cost-effectiveness of job search assistance. We also find that in line with existing policies, these programs should mainly be used at the beginning of unemployment and for short durations. However, contrary to existing schemes, they should be exclusively targeted at unemployed workers with low initial exit rates to employment. For all other workers, they should only be used if they fail to find a job within reasonable time despite high expected initial exit rates.job search, optimal unemployment insurance, welfare-to-work policies, recursive contracts

Evaluating Nationwide Health Interventions when Standard Before-After Doesn't Work: Malawi's ITN Distribution Program

Nationwide health interventions are difficult to evaluate as contemporaneous control groups do not exist and before-after approaches are usually infeasible. We propose an alternative semi-parametric estimator that is based on the assumption that the intervention has no direct effect on the health outcome but influences the outcome only through its effect on individual behavior. We show that in this case the evaluation problem can be divided into two parts: (i) the effect of the intervention on behavior, for which a conditional before-after assumption is more plausible; and (ii) the effect of the behaviour on the health outcome, where we exploit that a contemporaneous control groups exists for behavior. The proposed estimator is used to evaluate one of Malawi’s main malaria prevention campaigns, a nationwide insecticide-treated-net (ITN) distribution scheme, in terms of its effect on infant mortality. We exploit that the program affects child mortality only via bed net usage. We find that Malawi’s ITN distribution campaign reduced child mortality by 1 percentage point, which corresponds to about 30% of the total reduction in infant mortality over the study period.treatment effect, semi-parametric estimation, health intervention

Are training programs more effective when unemployment is high?

"We estimate short, medium, and long-run individual labor market effects of training programs for unemployed by following program participation on a monthly basis over a ten-year period. Since analyzing the effectiveness of training over such a long period is impossible with experimental data, we use an administrative database compiled for evaluating German training programs. Based on matching estimation adapted to the various issues that arise in this particular context, we find a clear positive relation between the effectiveness of the programs and the unemployment rate over time." (Author's abstract, IAB-Doku) ((en))Qualifizierungsmaßnahme, arbeitsmarktpolitische Maßnahme, Beschäftigungseffekte - Determinanten, Arbeitslosenquote, Arbeitslose, berufliche Reintegration, Arbeitsmarktchancen, Teilnehmerstruktur, Trainingsmaßnahme, Einkommenseffekte, Arbeitsmarktentwicklung, Westdeutschland, Bundesrepublik Deutschland

What Did All the Money Do? On the General Ineffectiveness of Recent West German Labour Market Programmes

We provide new evidence on the effectiveness of West German labour market programmes by evaluating training and employment programmes that have been conducted 2000 - 2002 after the first large reform of German labour market policy in 1998. We employ exceptionally rich administrative data that allow us to use microeconometric matching methods and to estimate interesting effects for different types of programmes and participants at a rather disaggregated level. We find that, on average, all programmes fail to improve their participants' chances of finding regular, unsubsidised employment. Rather, participants accumulate 2 - 13 more months of unemployment than nonparticipants over the 2.5 years following programme start, which, in addition to direct programme costs, induces net costs in terms of benefit payments and wage subsidies amounting to, on average, 1500- 7000 EUR per participant. However, we show that there is some scope for improvements in mean employment rates as well as potential for considerable cost savings by a reallocation of participants to the different programmes.Matching estimation, causal effects, programme evaluation, panel data

Evaluating Nationwide Health Interventions When Standard Before-After Doesn't Work: Malawi's ITN Distribution Program

Nationwide health interventions are difficult to evaluate as contemporaneous control groups do not exist and before-after approaches are usually infeasible. We propose an alternative semi-parametric estimator that is based on the assumption that the intervention has no direct effect on the health outcome but influences the outcome only through its effect on individual behavior. We show that in this case the evaluation problem can be divided into two parts: (i) the effect of the intervention on behavior, for which a conditional before-after assumption is more plausible; and (ii) the effect of the behavior on the health outcome, where we exploit that a contemporaneous control groups exists for behavior. The proposed estimator is used to evaluate one of Malawi's main malaria prevention campaigns, a nationwide insecticide-treated-net (ITN) distribution scheme, in terms of its effect on infant mortality. We exploit that the program affects child mortality only via bed net usage. We find that Malawi's ITN distribution campaign reduced child mortality by 1 percentage point, which corresponds to about 30% of the total reduction in infant mortality over the study period.health intervention, semi-parametric estimation, treatment effect

Evaluating Nationwide Health Interventions When Standard Before-After Doesn't Work: Malawi's ITN Distribution Program

Nationwide health interventions are difficult to evaluate as contemporaneous control groups do not exist and before-after approaches are usually infeasible. We propose an alternative semi-parametric estimator that is based on the assumption that the intervention has no direct effect on the health outcome but influences the outcome only through its effect on individual behavior. We show that in this case the evaluation problem can be divided into two parts: (i) the effect of the intervention on behavior, for which a conditional before-after assumption is more plausible; and (ii) the effect of the behavior on the health outcome, where we exploit that a contemporaneous control groups exists for behavior. The proposed estimator is used to evaluate one of Malawi's main malaria prevention campaigns, a nationwide insecticide-treated-net (ITN) distribution scheme, in terms of its effect on infant mortality. We exploit that the program affects child mortality only via bed net usage. We find that Malawi's ITN distribution campaign reduced child mortality by 1 percentage point, which corresponds to about 30% of the total reduction in infant mortality over the study period.Treatment effect; semi-parametric estimation; health intervention

Active Labour Market Policy in East Germany: Waiting for the Economy to Take Off

We investigate the effects of the most important East German active labour market programmes on the labour market outcomes of their participants. The analysis is based on a large and informative individual database coming from administrative data sources. Using matching methods, we find that over a horizon of 2.5 years after programme start the programmes fail to increase the employment chances of their participants in the regular labour market. However, the programmes may have other effects for their participants that may be considered important in the especially difficult situation experienced in the East German labour market.Matching estimation, causal effects, programme evaluation, panel data

Sensitivity of matching-based program evaluations to the availability of control variables

Based on new, exceptionally informative and large German linked employer-employee administrative data, we investigate the question whether the omission of important control variables in matching estimation leads to biased impact estimates of typical active labour market programs for the unemployed. Such biases would lead to false policy conclusions about the cost-effectiveness of these expensive policies. Using newly developed Empirical Monte Carlo Study methods, we find that besides standard personal characteristics, information on individual health and firm characteristics of the last employer are particularly important for selection correction. Moreover, it is important to account for past performance on the labour market in a very detailed and flexible way. Information on job search behaviour, timing of unemployment and program start, as well as detailed regional characteristics are also relevant.Training, job search assistance, matching estimation, active labour market policies.