how do employment effects of job creation schemes differ with respect to the foregoing unemployment...
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How Do Employment Effects of Job Creation Schemes Differ with Respect to the
Foregoing Unemployment Duration?
Reinhard HujerUniversity Frankfurt/M.
3rd Conference on Evaluation Research, Mannheim
Stephan L. ThomsenZEW, Mannheim
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Contents
1. Motivation
2. Job Creation Schemes in Germany
3. Evaluation Approach
4. Data Set
5. Employment Effects
6. Conclusion
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1. Motivation
• Job Creation Schemes (JCS) are part of German ALMP since 1969: Subsidised employment For unemployed persons facing barriers to employment
• Purpose: Re-integration of participants into regular employment
Provision of stable foundation and relevant qualifications
• Between 1997 and 2003: About 1.6 million participants Corresponding spending: about 23 billion Euros
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1. Motivation (2)
• Scepticism about effectiveness Lack of components that improve human capital, stigmatisation
• Recent empirical literature (e.g., Sianesi, 2004, Abbring/van den Berg, 2003): Timing of treatment in the unemployment spell is important for evaluating effects
• Overall finding of previous empirical studies: JCS do not improve the employment rate of the participants
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1. Motivation (3)
• Previous empirical studies evaluating JCS do not account for the timing of the programme explicitly, but Timing seems to be important for JCS Differences should be analysed
• Data used for the analysis: merged data from administrative sources of Federal Employment Agency (FEA)
• Evaluation Approach: Propensity Score Matching in Dynamic Setting
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2. Job Creation Schemes
• Provide jobs at public and non-commercial institutions for unemployed persons facing barriers to employment Long-term unemployed Older unemployed Young unemployed without professional training/ apprenticeship
• Financial assistance (paid to the employer) Wage subsidy of 30 to 75% (until 2003) Lump sum payment (since 2002 optional/ 2004 mandatory)
• Duration Normally 1 year, but for two and up to three years
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2. Job Creation Schemes – Pre-Conditions
• For jobs to be promoted
– Additional in nature– For the collective good– Appropriate to the problems of the regional labour market
• For participants
– (long-term) unemployment– Eligible for unemployment insurance benefits
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2. Expected/Possible Effects of Job Creation Schemes
Pros Cons
Microeconomic Dimension
• Adjustment (prevention) of human capital (loss)
• Bridge to regular employment/ retirement
• ‘Soft‘ human capital effects/ Improve Motivation
• Discreation of human capital
• Negative Signal to potential employers
• Reduce one‘s own initiative
• Locking-in effects
• Discourage People
Macroeconomic Dimension
• Relief of labour market
• Investment in infrastructure
• Misallocation of Resources
• Competition with private production
• Displacement and substitution effects
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3. Evaluation Approach (1)
• Standard framework: model of potential outcomes (Y1, Y0) Designed for the case where programme is exposed once and at one specific point of time
• Purpose: Estimation of causal effect, e.g., average effect of treatment on the treated (ATT):
-
- E(Y0|D=1) has to be estimated
• In comprehensive ALMP systems, unemployed persons
face a number of different programs,
could start at different points of time
1 0( | 1) ( | 1) ( | 1)E D E Y D E Y D
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3. Evaluation Approach (2)
• Definition of non-participation is not straightforward All persons are potential non-participants as long as they do not join a programme or leave the labour market for work Time until start of programme contains important information for the effects and has to be considered
• ATT with respect to the starting point of programmes:
11 1
01 1
( , ) ( | 1, 1, 0)
( | 1, 1, 0)
t t
t t
t E Y D U t D D
E Y D U t D D
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3. Evaluation Approach (3)
• Parameter answers the following question:“What is the impact at time of participation in JCS for an individual that joined the programme in time t of the unemployment spell?”
• Descriptive comparison of the estimated programme effects for the single points t no causal interpretation of differences!
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3. Evaluation Approach – Matching (4)
• Idea: Conditioning on all relevant characteristics, X, to make both groups comparable
X must be observable!
• Rosenbaum/Rubin (1983): not the single X, but a scalar function, p(X), propensity score
• Identifying Assumption (Mean Conditional Independence Assumption for ATT):
• Dynamic Setting (see Fitzenberger/Speckesser, 2005):
01 1( ) | ( ), 1, ... 0t t tE Y D p X U t D D
0 0 0( ) | ( ) [ | 1, ( )] [ | 0, ( )]E Y D p X E Y D p X E Y D p X
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4. Data Set (1)
• 6 Samples of part. and non-part. (1:20): Jul, Sep, Nov 00, Jan, Mar, May 01
• Main sources: Programme Participants’ Master Data Set Job-Seekers Data Base Employment Statistics Register
• Available information (objective and subjective): socio-demographics (e.g., age, gender) qualification/career variables (e.g., schooling, occupation) labour market history (e.g., duration of last job), information on regional labour market Outcome variable: Regular employment (until Dec 03)
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4. Data Set (2)
• Data of the six samples are pooled (32,641 participants/ 1,104,664 non-participants) consideration of time individuals spent in unemployment
• Persons younger than 25 years or older than 55 are excluded better homogeneity of group in analysis
• Employment effects are analysed separately for East and West Germany and gender
• Berlin is excluded from analysis
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5. Employment Effects - Implementation
• Unemployment is discretised into quarters (u=1,…,12=Umax)
Programme effects of JCS are analysed for programmes starting during the first three years of unemployment
• Programme effects are estimated until =30
• Estimation of four series of 12 probit models
• Only the first programme in the current unemployment spell is analysed, subsequent programmes are viewed as an outcome of the first
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5. Employment Effects for Men (t=1, t=5, and t=9)
-0.30
-0.25
-0.20
-0.15
-0.10
-0.05
-0.00
0.05
0.10
0.15
0.20
0.25
AT
T (
Em
ploy
men
t)
1 5 10 15 20 25 30Month after programme start
Employment Effect 95% Conf. Interval
-0.30
-0.25
-0.20
-0.15
-0.10
-0.05
-0.00
0.05
0.10
0.15
0.20
0.25
AT
T (
Em
ploy
men
t)
1 5 10 15 20 25 30Month after programme start
Employment Effect 95% Conf. Interval
-0.30
-0.25
-0.20
-0.15
-0.10
-0.05
-0.00
0.05
0.10
0.15
0.20
0.25
AT
T (
Em
ploy
men
t)
1 5 10 15 20 25 30Month after programme start
Employment Effect 95% Conf. Interval
West
-0.30
-0.25
-0.20
-0.15
-0.10
-0.05
-0.00
0.05
0.10
0.15
0.20
0.25
AT
T (
Em
ploy
men
t)
1 5 10 15 20 25 30Month after programme start
Employment Effect 95% Conf. Interval
-0.30
-0.25
-0.20
-0.15
-0.10
-0.05
-0.00
0.05
0.10
0.15
0.20
0.25
AT
T (
Em
ploy
men
t)
1 5 10 15 20 25 30Month after programme start
Employment Effect 95% Conf. Interval
-0.30
-0.25
-0.20
-0.15
-0.10
-0.05
-0.00
0.05
0.10
0.15
0.20
0.25
AT
T (
Em
ploy
men
t)
1 5 10 15 20 25 30Month after programme start
Employment Effect 95% Conf. Interval
East
(1,30)= -6.3 (5,30)= 7.5 (9,30)= 5.8
(1,30)= -5.5 (5,30)= 1.0 n.s. (9,30)= -.8 n.s.
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5. Employment Effects for Women (t=1, t=5 and t=9)
-0.30
-0.25
-0.20
-0.15
-0.10
-0.05
-0.00
0.05
0.10
0.15
0.20
0.25
AT
T (
Em
ploy
men
t)
1 5 10 15 20 25 30Month after programme start
Employment Effect 95% Conf. Interval
-0.30
-0.25
-0.20
-0.15
-0.10
-0.05
-0.00
0.05
0.10
0.15
0.20
0.25
AT
T (
Em
ploy
men
t)
1 5 10 15 20 25 30Month after programme start
Employment Effect 95% Conf. Interval
-0.30
-0.25
-0.20
-0.15
-0.10
-0.05
-0.00
0.05
0.10
0.15
0.20
0.25
AT
T (
Em
ploy
men
t)
1 5 10 15 20 25 30Month after programme start
Employment Effect 95% Conf. Interval
-0.30
-0.25
-0.20
-0.15
-0.10
-0.05
-0.00
0.05
0.10
0.15
0.20
0.25
AT
T (
Em
ploy
men
t)
1 5 10 15 20 25 30Month after programme start
Employment Effect 95% Conf. Interval
-0.30
-0.25
-0.20
-0.15
-0.10
-0.05
-0.00
0.05
0.10
0.15
0.20
0.25
AT
T (
Em
ploy
men
t)
1 5 10 15 20 25 30Month after programme start
Employment Effect 95% Conf. Interval
-0.30
-0.25
-0.20
-0.15
-0.10
-0.05
-0.00
0.05
0.10
0.15
0.20
0.25
AT
T (
Em
ploy
men
t)
1 5 10 15 20 25 30Month after programme start
Employment Effect 95% Conf. Interval
West
East(1,30)= -3.4 (5,30)= 2.3 n.s. (9,30)= -1.6 n.s.
(1,30)= -2.6 n.s. (5,30)= 11.9 (9,30)= 13.3
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5. Employment Effects (3)
• West Germany Negative employment effects when starting early Positive when starting after one or two years, but:
result could not be established for all groups
• East Germany Negative effects when starting early No positive effects for any of the groups in analysis
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6. Conclusion
• Overall Effects differ by t (descriptive comparison) Participation is associated with strong locking-in effects Persons who join after a short period of unemployment are worse off Results tend to be better for long-term unemployed people
Programmes do not improve the re-employment chances of the participants compared to non-participation (in adequate time after start of programmes)
Results indicate a low target-oriented allocation of unemployed persons into programmes