1932

Abstract

Active labor market policies are massively used with the objective being to improve labor market outcomes of individuals out of work. Many observational evaluation studies have been published. In this review, we critically assess policy effectiveness. We emphasize insights from recent randomized controlled trials. In addition, we examine policy effects that have not been the primary object of most of the past evaluations, such as anticipatory effects of advance knowledge of future treatments and equilibrium effects, and we discuss the actual implementation of policies. We discuss the importance of heterogeneity of programs and effects and examine the extent to which potential participants are interested in enrollment. We also discuss the assessment of costs and benefits of programs.

Loading

Article metrics loading...

/content/journals/10.1146/annurev-economics-080614-115738
2016-10-31
2024-03-29
Loading full text...

Full text loading...

/deliver/fulltext/economics/8/1/annurev-economics-080614-115738.html?itemId=/content/journals/10.1146/annurev-economics-080614-115738&mimeType=html&fmt=ahah

Literature Cited

  1. Abbring JH, van den Berg GJ. 2003. The nonparametric identification of treatment effects in duration models. Econometrica 71:51491–517 [Google Scholar]
  2. Abbring JH, van den Berg GJ. 2005. Social experiments and instrumental variables with duration outcomes Work. Pap. 2005:11, IFAU (Inst. Labor Mark. Eval.), Uppsala, Swed.
  3. Aeberhardt R, Chiod V, Crépon B, Gain M, Vicard A. 2015. The demand for employability investments: evidence from a youth conditional cash transfer program in France Work. Pap., Cent. Res. Econ. Stat., Malakoff, France [Google Scholar]
  4. Albrecht J, van den Berg G, Vroman S. 2009. The aggregate labor market effects of the Swedish Knowledge Lift program. Rev. Econ. Dyn. 12:1129–46 [Google Scholar]
  5. Ashenfelter O, Ashmore D, Deschenes O. 2005. Do unemployment insurance recipients actively seek work? Evidence from randomized trials in four U.S. states. J. Econom. 125:1–253–75 [Google Scholar]
  6. Attanasio O, Guarín A, Medina C, Meghir C. 2015. Long term impacts of vouchers for vocational training: experimental evidence for Colombia NBER Work. Pap. 21390
  7. Attanasio O, Kugler A, Meghir C. 2011. Subsidizing vocational training for disadvantaged youth in Colombia: evidence from a randomized trial. Am. Econ. J. Appl. Econ. 3:3188–220 [Google Scholar]
  8. Autor DH, Houseman SN. 2010. Do temporary-help jobs improve labor market outcomes for low-skilled workers? Evidence from “Work First.”. Am. Econ. J. Appl. Econ. 2:396–128 [Google Scholar]
  9. Babcock L, Congdon W, Katz L, Mullainathan S. 2012. Notes on behavioral economics and labor market policy. IZA J. Labor Policy 1:11–14 [Google Scholar]
  10. Beam E. 2014. Incomplete information in job search: evidence from a field experiment in the Philippines Work. Pap., Dep. of Econ., Natl. Univ. Singapore
  11. Behaghel L, Crépon B, Gurgand M. 2014. Private and public provision of counseling to job seekers: evidence from a large controlled experiment. Am. Econ. J. Appl. Econ. 6:4142–74 [Google Scholar]
  12. Behncke S, Frölich M, Lechner M. 2007. Targeting labour market programmes: results from a randomized experiment Work. Pap. 3085, IZA (Inst. Study Labor), Bonn, Ger. [Google Scholar]
  13. Bell SH, Orr LL. 1994. Is subsidized employment cost effective for welfare recipients? Experimental evidence from seven state demonstrations. J. Hum. Resourc. 29:142–61 [Google Scholar]
  14. Bergemann AH, van den Berg GJ. 2008. Active labor market policy effects for women in Europe: a survey. Ann. Econ. Stat. 91/92:377–99 [Google Scholar]
  15. Bhattacharya D, Dupas P. 2012. Inferring welfare maximizing treatment assignment under budget constraints. J. Econom. 167:1168–96 [Google Scholar]
  16. Bitler M, Gelbach J, Hoynes H. 2006. What mean impacts miss: distributional effects of welfare reform experiments. Am. Econ. Rev. 96:988–1012 [Google Scholar]
  17. Björklund A, Clark M, Edin PA, Fredriksson P, Krueger A. 2005. The Market Comes to Education—An Evaluation of Sweden's Surprising School Reforms New York: Russell Sage
  18. Black DA, Smith JA, Berger MC, Noel BJ. 2003. Is the threat of reemployment services more effective than the services themselves? Evidence from random assignment in the UI system. Am. Econ. Rev. 93:41313–27 [Google Scholar]
  19. Blasco S, Rosholm M. 2011. The impact of active labour market policy on post-unemployment outcomes: evidence from a social experiment in Denmark Work. Pap. 5631, IZA (Inst. Study Labor), Bonn, Ger. [Google Scholar]
  20. Bloom D. 2010. Transitional jobs: background, program models, and evaluation evidence MDRC New York:
  21. Bloom D, Michalopoulos C. 2001. How welfare and work policies affect employment and income: a synthesis of research MDRC New York:
  22. Bloom HS, Orr LL, Bell SH, Cave G, Doolittle F. et al. 1997. The benefits and costs of JTPA title II-A programs: key findings from the National Job Training Partnership Act study. J. Hum. Resourc. 32:3549–76 [Google Scholar]
  23. Blundell R, Dias MC, Meghir C, Reenen JV. 2004. Evaluating the employment impact of a mandatory job search program. J. Eur. Econ. Assoc. 2:4569–606 [Google Scholar]
  24. Brodaty T, Crépon B, Fougere D. 2002. Using matching estimators to evaluate alternative youth employment programs: evidence from France, 1986–1988. Econometric Evaluation of Labour Market Policies M. Lechner, F Pfeiffer 85–123 Berlin: Springer-Verlag [Google Scholar]
  25. Burtless G. 1985. Are targeted wage subsidies harmful? Evidence from a wage voucher experiment. Ind. Labor Relat. Rev. 39:1105–14 [Google Scholar]
  26. Butler D, Alson J, Bloom D, Deitch V, Hill A. et al. 2012. What strategies work for the hard-to-employ? Final results of the hard-to-employ demonstration and evaluation project and selected sites from the employment retention and advancement project MDRC New York:
  27. Cahuc P, Le Barbanchon T. 2010. Labor market policy evaluation in equilibrium: some lessons of the job search and matching model. Labour Econ 17:1196–205 [Google Scholar]
  28. Caliendo M, Cobb-Clark DA, Uhlendorff A. 2015. Locus of control and job search strategies. Rev. Econ. Stat. 97:188–103 [Google Scholar]
  29. Caliendo M, Hujer R, Thomsen S. 2005. The employment effects of job creation schemes in Germany: a microeconometric evaluation Work. Pap. 1512, IZA (Inst. Study Labor), Bonn, Ger. [Google Scholar]
  30. Calmfors L. 1994. Active labour market policy and unemployment—a framework for the analysis of crucial design features. OECD Econ. Stud. 22:7–47 [Google Scholar]
  31. Carcillo S, Grubb D. 2006. From inactivity to work: the role of active labour market policies, social employment and migration Work. Pap. 36, OECD (Organ. Econ. Co-Op. Dev.), Paris
  32. Card D, Hyslop DR. 2005. Estimating the effects of a time-limited earnings subsidy for welfare-leavers. Econometrica 73:61723–70 [Google Scholar]
  33. Card D, Ibarraran P, Regalia F, Rosas-Shady D, Soares Y. 2011. The labor market impacts of youth training in the Dominican Republic. J. Labor Econ. 29:2267–300 [Google Scholar]
  34. Card D, Kluve J, Weber A. 2010. Active labour market policy evaluations: a meta-analysis. Econ. J. 120:548F452–77 [Google Scholar]
  35. Card D, Kluve J, Weber A. 2015. What works? A meta analysis of recent active labor market program evaluations Discuss. Pap. 9236, IZA (Inst. Study Labor), Bonn, Ger.
  36. Cave G, Bos H, Doolittle F, Toussaint C. 1993. JOBSTART: final report on a program for school dropouts MDRC New York:
  37. Couch KA. 1992. New evidence on the long-term effects of employment training programs. J. Labor Econ. 10:4380–88 [Google Scholar]
  38. Crépon B, Dejemeppe M, Gurgand M. 2005. Counseling the unemployed: Does it lower unemployment duration and recurrence? Discuss. Pap. 1796, IZA (Inst. Study Labor), Bonn, Ger. [Google Scholar]
  39. Crépon B, Duflo E, Gurgand M, Rathelot R, Zamora P. 2013. Do labor market policies have displacement effects? Evidence from a clustered randomized experiment. Q. J. Econ. 128:2531–80 [Google Scholar]
  40. Crépon B, Ferracci M, Jolivet G, van den Berg GJ. 2009. Active labor market policy effects in a dynamic setting. J. Eur. Econ. Assoc. 7:2–3595–605 [Google Scholar]
  41. Dammert AC, Galdo J, Galdo V. 2013. Digital labor-market intermediation and job expectations: evidence from a field experiment. Econ. Lett. 120:1112–16 [Google Scholar]
  42. Davidson C, Woodbury SA. 1993. The displacement effect of reemployment bonus programs. J. Labor Econ. 11:4575–605 [Google Scholar]
  43. Decker P, Olsen R, Freeman L, Klepinger D. 2000. Assisting unemployment insurance claimants: the long-term impacts of the job search assistance demonstration Proj. Rep. 8170-700, Mathematica Pol. Res., Princeton, NJ
  44. DellaVigna S, Paserman MD. 2005. Job search and impatience. J. Labor Econ. 23:3527–88 [Google Scholar]
  45. Dhaliwal I, Duflo E, Glennerster R, Tulloch C. 2011. Comparative cost-effectiveness analysis to inform policy in developing countries: a general framework with applications for education. Education Policy in Developing Countries P. Glewwe. Chicago: Univ. Chicago Press [Google Scholar]
  46. Djebbari H, Smith J. 2008. Heterogeneous impacts in PROGRESA. J. Econom. 145:64–80 [Google Scholar]
  47. Dolton P, O'Neill D. 2002. The long-run effects of unemployment monitoring and work-search programs: experimental evidence from the United Kingdom. J. Labor Econ. 20:2381–403 [Google Scholar]
  48. Eberts RW, O'Leary CJ, Wandner SA. 2002. Targeting Employment Services Kalamazoo, MI: Upjohn Inst. Press
  49. Eissa N, Liebman JB. 1996. Labor supply response to the earned income tax credit. Q. J. Econ. 111:2605–37 [Google Scholar]
  50. Fay RG. 1996. Enhancing the effectiveness of active labour market policies: evidence from programme evaluations in OECD countries Work. Pap. 18, OECD (Organ. Econ. Co-Op. Dev.), Paris
  51. Ferracci M, Jolivet G, van den Berg GJ. 2014. Evidence of treatment spillovers within markets. Rev. Econ. Stat. 96:5812–23 [Google Scholar]
  52. Forslund A, Fredriksson P, Vikström J. 2011. What active labor market policy works in a recession?. Nord. Econ. Policy Rev. 1:171–201 [Google Scholar]
  53. Forslund A, Krueger AB. 1997. An evaluation of the Swedish active labor market policy: new and received wisdom NBER Work. Pap. 4802 [Google Scholar]
  54. Franklin S. 2015. Location, search costs and youth unemployment: a randomized trial of transport subsidies in Ethiopia Work. Pap. WPS/2015-11, Cent. Study Afr. Econ., Univ. Oxford, UK
  55. Friedlander D. 1988. Subgroup impacts and performance indicators for selected welfare employment programs MDRC New York:
  56. Frölich M. 2008. Statistical treatment choice: an application to active labor market programs. J. Am. Stat. Assoc. 103:482547–58 [Google Scholar]
  57. Frölich M, Lechner M, Steiger H. 2003. Statistically assisted programme selection—international experiences and potential benefits for Switzerland. Swiss J. Econ. Stat. 139:III311–31 [Google Scholar]
  58. Galasso E, Ravallion M, Salvia A. 2004. Assisting the transition from workfare to work: a randomized experiment. Ind. Labor Relat. Rev. 58:1128–42 [Google Scholar]
  59. Gerfin M, Lechner M, Steiger H. 2005. Does subsidised temporary employment get the unemployed back to work? An econometric analysis of two different schemes. Labour Econ 12:6807–35 [Google Scholar]
  60. Groh M, Krishnan N, McKenzie D, Vishwanath T. 2012. Soft skills or hard cash? The impact of training and wage subsidy programs on female youth employment in Jordan Work. Pap. 6141 World Bank Washington, DC:
  61. Grubb D, Puymoyen A. 2008. Long time series for public expenditure on labour market programmes, OECD social, employment and migration. Work. Pap. 73, OECD (Organ. Econ. Co-Op. Dev.), Paris
  62. Ham JC, LaLonde RJ. 1996. The effect of sample selection and initial conditions in duration models: evidence from experimental data on training. Econometrica 64:175–205 [Google Scholar]
  63. Heckman JJ, Hohmann N, Smith J, Khoo M. 2000. Substitution and dropout bias in social experiments: a study of an influential social experiment. Q. J. Econ.651–94
  64. Heckman JJ, LaLonde RJ, Smith JA. 1999. The economics and econometrics of active labor market programs. Handb. Labor Econ. 3:1865–2097 [Google Scholar]
  65. Heckman JJ, Lochner L, Taber C. 1998. General equilibrium treatment effects: a study of tuition policy. Am. Econ. Rev. 88:381–86 [Google Scholar]
  66. Heckman JJ, Smith J, Clements N. 1997. Making the most out of programme evaluations and social experiments: accounting for heterogeneity in programme impacts. Rev. Econ. Stud. 64:4487–535 [Google Scholar]
  67. Hendra R, Dillman K-N, Hamilton G, Lundquist E, Martinson K. et al. 2010. How effective are different approaches aiming to increase employment retention and advancement? Final impacts for twelve models MDRC New York: [Google Scholar]
  68. Hirshleifer S, McKenzie D, Almeida R, Ridao-Cano C. 2016. The impact of vocational training for the unemployed: experimental evidence from Turkey. Econ. J. In press. doi: 10.1111/ecoj.12211
  69. Hollister RG, Kemper P, Maynard RA. 1984. The National Supported Work Demonstration Madison: Univ. Wisc. Press
  70. Jensen R. 2012. Do labor market opportunities affect young women's work and family decisions? Experimental evidence from India. Q. J. Econ. 127:2753–92 [Google Scholar]
  71. Katz LF. 1998. Wage subsidies for the disadvantaged. Generating Jobs: How to Increase Demand for Less-Skilled Workers RB Freeman, P Gottschalk 21–53 New York: Russell Sage [Google Scholar]
  72. Krug G, Stephan G. 2013. Is the contracting-out of intensive placement services more effective than provision by the PES? Evidence from a randomized field experiment Work. Pap. 7403, IZA (Inst. Study Labor), Bonn, Ger.
  73. Kugler A, Kugler M, Saavedra J, Prada LOH. 2015. Long-term direct and spillover effects of job training: experimental evidence from Colombia. BER Work. Pap. 21607
  74. Laun L, Thoursie PS. 2014. Does privatisation of vocational rehabilitation improve labour market opportunities? Evidence from a field experiment in Sweden. J. Health Econ. 34:59–72 [Google Scholar]
  75. Lechner M, Miquel R, Wunsch C. 2011. Long-run effects of public sector sponsored training in West Germany. J. Eur. Econ. Assoc. 9:4742–84 [Google Scholar]
  76. Lechner M, Smith J. 2007. What is the value added by caseworkers?. Labour Econ 14:2135–51 [Google Scholar]
  77. Lee DS. 2009. Training, wages, and sample selection: estimating sharp bounds on treatment effects. Rev. Econ. Stud. 76:31071–102 [Google Scholar]
  78. Lee W. 2009. Private deception and the rise of public employment offices in the United States, 1890–1930. Studies of Labor Market Intermediation DH Autor 155–82 Chicago: Univ. Chicago Press [Google Scholar]
  79. Levinsohn J, Rankin N, Roberts G, Schöer V. 2014. Wage subsidies and youth employment in South Africa: evidence from a randomised control trial. Work. Pap. 02/14, Dep. Econ., Univ. Stellenbosch, S. Afr.
  80. Lise J, Seitz S, Smith J. 2015. Evaluating search and matching models using experimental data. IZA J. Labor Econ. 4:16 [Google Scholar]
  81. Manski CF. 2004. Statistical treatment rules for heterogeneous populations. Econometrica 72:41221–46 [Google Scholar]
  82. Martin JP, Grubb D. 2001. What works and for whom: a review of OECD countries' experiences with active labour market policies. Swed. Econ. Policy Rev. 8:9–56 [Google Scholar]
  83. Meyer BD. 1995. Lessons from the US unemployment insurance experiments. J. Econ. Lit. 33:191–131 [Google Scholar]
  84. Michalopoulos C. 2004. What works best for whom? Effects of welfare and work policies by subgroup MDRC New York:
  85. Michalopoulos C, Robins PK, Card D. 2005. When financial work incentives pay for themselves: evidence from a randomized social experiment for welfare recipients. J. Public Econ. 89:15–29 [Google Scholar]
  86. Michalopoulos C, Schwartz C. 2001. What works best for whom? Impacts of 20 welfare-to-work programs by subgroup. MDRC New York: [Google Scholar]
  87. Millenky M, Bloom D, Muller-Ravett S, Broadus J. 2011. Staying on course: three-year results of the National Guard Youth ChalleNGe evaluation MDRC New York:
  88. Miller C, van Dok M, Tessler BL, Pennington A. 2012. Strategies to help low-wage workers advance: implementation and final impacts of the Work Advancement and Support Center (WASC) demonstration MDRC New York: [Google Scholar]
  89. Moffitt R. 2002. Policy interventions, low-level equilibria, and social interactions. Social Dynamics S Durlauf, P Young 45–82 Cambridge, MA: MIT Press [Google Scholar]
  90. OECD (Organ. Econ. Co-Op. Dev.) 2013. Employment Outlook 2013 Paris: OECD
  91. Pallais A. 2014. Inefficient hiring in entry-level labor markets. Am. Econ. Rev. 104:113565–99 [Google Scholar]
  92. Robins PK, Michalopoulos C, Foley K. 2008. Are two carrots better than one? The effects of adding employment services to financial incentive programs for welfare recipients. Ind. Labor Relat. Rev. 61:3410–23 [Google Scholar]
  93. Schochet PZ, Burghardt J, McConnell S. 2006. National Job Corps study and longer-term follow-up study: impact and benefit-cost findings using survey and summary earnings records data Proj. Rep. 6095-300, Mathematica Pol. Res., Princeton, NJ
  94. Schochet PZ, Burghardt J, McConnell S. 2008. Does Job Corps work? Impact findings from the National Job Corps study. Am. Econ. Rev. 98:1864–86 [Google Scholar]
  95. Spinnewijn J. 2015. Unemployed but optimistic: optimal insurance design with biased beliefs. J. Eur. Econ. Assoc. 13:1130–67 [Google Scholar]
  96. van den Berg GJ, Bergemann AH, Caliendo M. 2009. The effect of active labor market programs on not-yet treated unemployed individuals. J. Eur. Econ. Assoc. 7:2–3606–16 [Google Scholar]
  97. van den Berg GJ, van der Klaauw B. 2006. Counseling and monitoring of unemployed workers: theory and evidence from a controlled social experiment. Int. Econ. Rev. 47:3895–936 [Google Scholar]
  98. van den Berg GJ, van der Klaauw B. 2013. Structural empirical evaluation of job search monitoring Work. Pap. 7740, IZA (Inst. Study Labor), Bonn, Ger.
  99. van den Berg GJ, van der Klaauw B, van Ours JC. 2004. Punitive sanctions and the transition rate from welfare to work. J. Labor Econ. 22:211–41 [Google Scholar]
  100. van den Berg GJ, Vikström J. 2014. Monitoring job offer decisions, punishments, exit to work, and job quality. Scand. J. Econ. 116:284–334 [Google Scholar]
  101. Vikström J. 2014. IPW estimation and related estimators for evaluation of active labor market policies in a dynamic setting Work. Pap. 2014:1, IFAU (Inst. Labor Mark. Eval.), Uppsala, Swed.
  102. Woodbury SA, Spiegelman RG. 1987. Bonuses to workers and employers to reduce unemployment: randomized trials in Illinois. Am. Econ. Rev. 77:4513–30 [Google Scholar]
/content/journals/10.1146/annurev-economics-080614-115738
Loading
/content/journals/10.1146/annurev-economics-080614-115738
Loading

Data & Media loading...

Supplemental Material

Supplementary Data

  • Article Type: Review Article
This is a required field
Please enter a valid email address
Approval was a Success
Invalid data
An Error Occurred
Approval was partially successful, following selected items could not be processed due to error