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How Do Employment Effects of Job Creation Schemes Differ with Respect to the Foregoing Unemployment Duration?. Stephan L. Thomsen ZEW, Mannheim. Reinhard Hujer University Frankfurt/M. 3rd Conference on Evaluation Research, Mannheim. Contents . Motivation Job Creation Schemes in Germany
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How Do Employment Effects of Job Creation Schemes Differ with Respect to the Foregoing Unemployment Duration? Stephan L. Thomsen ZEW, Mannheim Reinhard Hujer University Frankfurt/M. 3rd Conference on Evaluation Research, Mannheim
Contents • Motivation • Job Creation Schemes in Germany • Evaluation Approach • Data Set • Employment Effects • Conclusion
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
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
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
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
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
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
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:
3. Evaluation Approach (3) • Parameter answers the following question: “What is the impact at time t 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!
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):
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)
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
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 t=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
5. Employment Effects for Men (t=1, t=5, and t=9) West D(1,30)= -6.3 D(5,30)= 7.5 D(9,30)= 5.8 East D(1,30)= -5.5 D(5,30)= 1.0 n.s. D(9,30)= -.8 n.s.
5. Employment Effects for Women (t=1, t=5 and t=9) West D(1,30)= -2.6 n.s. D(5,30)= 11.9 D(9,30)= 13.3 East D(1,30)= -3.4 D(5,30)= 2.3 n.s. D(9,30)= -1.6 n.s.
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
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