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Abstract:
Measures of Active Labor Market Policy are widely used in European countries, but despite many econometric evaluation studies no conclusive cross-country evidence exists regarding what program works for what target group under what (economic and institutional) circumstances? This paper results from an extensive research project for the European Commission aimed at answering that question using a meta-analytical framework. The empirical results are surprisingly clear-cut: Rather than contextual factors such as labor market institutions or the business cycle, it is almost exclusively the program type that matters for program effectiveness. While direct employment programs in the public sector appear detrimental, wage subsidies and Services and Sanctions can be effective in increasing participants' employment probability.

Active Labor Market Policy, program evaluation, meta analysis

Abstract:
Having faced high unemployment rates for more than a decade, the German government implemented a comprehensive set of labour market reforms during the period 2003-2005. This paper describes the economic and institutional context of the German labour market before and after these so-called Hartz reforms. Focussing on active policy measures, we delineate the rationale for reform and its main principles. As results of programme evaluation studies post-reform have become available just now, we give a first assessment of the effectiveness of key elements of German ALMP before and after the Hartz reforms. The evidence indicates that the re-organisation of public employment services was mainly successful, with the exception of the outsourcing of services. Re-designing training programmes seems to have improved their effectiveness, while job creation schemes continue to be detrimental for participants' employment prospects. Wage subsidies and startup subsidies show significantly positive effects. On balance, therefore, the reform seems to be moving the German labour market in the right direction.

Active Labour Market Policy, labour market reform, programme evaluation

Abstract:
Causal inference in the empirical sciences is based on counterfactuals. This paper presents the counterfactual account of causation in terms of Lewis's possible-world semantics, and reformulates the statistical potential outcome framework and its underlying assumptions using counterfactual conditionals. I discuss varieties of causally meaningful counterfactuals for the case of a finite number of treatments, and illustrate these using a simple set-theoretical framework. The paper proceeds to examine proximity relations between possible worlds, and discusses implications for empirical practice.

Causation, Counterfactuals, Possible Worlds, Treatment Effect

Abstract:
Over the last year the German government has introduced a comprehensive set of labor market policy reforms, the so-called Hartz reforms, which aim at a significant reduction of unemployment. To this end, (a) many of the existing instruments of active labor market policy are modified considerably, (b) a set of new instruments is introduced, and (c) the administrative framework in which these measures operate is changed substantially. In order to be able to judge the success of these measures by the end of the current legislative period in mid-2006, the government has asked academic experts to set up an evaluation concept capable of generating reliable empirical evidence by that date. The task is therefore to develop a ready-to-implement concept for the evaluation of the full set of reforms in their entirety, as well as each instrument on its own, facing substantive constraints regarding data availability and a short time horizon. This paper presents such a concept. We discuss essential guidelines for an ideal evaluation design, conceptual and practical difficulties that arise in the context of evaluating the Hartz reforms, and ways to overcome these obstacles. After detailing the three main analytical steps - analyses of effectiveness, efficiency, and implementation and process analysis - we present the concrete evaluation design, specific methods applicable to particular instruments, and a sampling scheme for collecting the required data. In addition to the fact that our concept is directly implementable, it also has the advantage of being extensible for future labor market policy evaluations.

program evaluation, identification, active labor market policy, policy reform, evaluation design

Abstract:
This paper presents a meta-analysis of recent microeconometric evaluations of active labor market policies. Our sample consists of 199 program estimates drawn from 97 studies conducted between 1995 and 2007. In about one-half of these cases we have both a short-term impact estimate (for a one-year post-program horizon) and a medium-term estimate (two-year horizon). We characterize the program estimates according to the type and duration of the program, the characteristics of the participants, and the evaluation methodology. Heterogeneity in all three dimensions affects the likelihood that an impact estimate is significantly positive, significantly negative, or statistically insignificant. Comparing program types, subsidized public sector employment programs have the least favorable impact estimates. Job search assistance programs have relatively favorable short-run impacts, whereas classroom and on-the-job training programs tend to show better outcomes in the medium-run than the short-run. Programs for youths are less likely to yield positive impacts than untargeted programs, but there are no large or systematic differences by gender. Methodologically, we find that the outcome variable used to measure program effectiveness matters. Evaluations based on registered unemployment durations are more likely to show favorable short-term impacts. Controlling for the outcome measure, and the type of program and participants, we find that experimental and non-experimental studies have similar fractions of significant negative and significant positive impact estimates, suggesting that the research designs used in recent non-experimental evaluations are unbiased.

active labor market policy, program evaluation, meta-analysis

Abstract:
This paper estimates causal effects of two Polish active labor market policies - Training and Intervention Works - on employment probabilities. Using data from the 18th wave of the Polish Labor Force Survey we discuss three stages of an appropriately designed matching procedure and demonstrate how the method succeeds in balancing relevant covariates. The validity of this approach is illustrated using the estimated propensity score as a summary measure of balance. We implement a conditional difference-in-differences estimator of treatment effects based on individual trinomial sequences of pre-treatment labor market status. Our findings suggest that Training raises employment probability, while Intervention Works seems to lead to a negative treatment effect for men. Furthermore, we find that appropriate subdivision of the matched sample for conditional treatment effect estimation can add considerable insight to the interpretation of results.

Active Labor Market Policy, Transition, Exact Matching, Propensity Score

Abstract:
Determining the optimal age at which a child should enter school is a controversial topic in education policy. In particular, German policy makers, pedagogues, parents, and teachers have since long discussed whether the traditional, established age of school entry at 6 years remains appropriate. Policies of encouraging early school entry or increased consideration of a particular child's competency for school (Schulfähigkeit) have been suggested. Using a dataset capturing children who entered school in the late 1960s through the late 1970s, a time when delaying enrolment was common, we investigate the effect of age at school entry on educational attainment for West and East Germany. Empirical results from linear probability models and matching suggest a qualitatively negative relation between the age at school entry and educational outcomes both in terms of schooling degree and probability of having to repeat a grade. These findings are likely driven by unobserved ability differences between early and late entrants. We therefore use a cut-off date rule and the corresponding age at school entry according to the regulation to instrument the actual age at school entry. The IV estimates suggest there is no effect of age at school entry on educational performance.

schooling, matching, instrumental variables

Abstract:
This paper investigates the method of matching regarding two crucial implementation choices, the distance measure and the type of algorithm. We implement optimal full matching - a fully efficient algorithm - and present a framework for statistical inference. The implementation uses data from the NLSY79 to study the effect of college education on earnings. We find that decisions regarding the matching algorithm depend on the structure of the data: In the case of strong selection into treatment and treatment effect heterogeneity a full matching seems preferable. If heterogeneity is weak, pair matching suffices.

matching algorithms, optimal full matching, selection into treatment

Abstract:
This paper assesses the dynamics of treatment effects arising from variation in the duration of training. We use German administrative data that have the extraordinary feature that the amount of treatment varies continuously from 10 days to 395 days (i.e. 13 months). This feature allows us to estimate a continuous dose-response function that relates each value of the dose, i.e. days of training, to the individual post-treatment employment probability (the response). The dose-response function is estimated after adjusting for covariate imbalance using the generalized propensity score, a recently developed method for covariate adjustment under continuous treatment regimes. Our data have the advantage that we can consider both the actual and planned training durations as treatment variables: If only actual durations are observed, treatment effect estimates may be biased because of endogenous exits. Our results indicate an increasing dose-response function for treatments of up to 100 days, which then flattens out. That is, longer training programs do not seem to add an additional treatment effect.

training, program evaluation, continuous treatment, generalized propensity score

Abstract:
This paper assesses the dynamics of treatment effects arising from variation in the duration of training. We use German administrative data that have the extraordinary feature that the amount of treatment varies continuously from 10 days to 395 days (i.e. 13 months).This feature allows us to estimate a continuous dose-response function that relates each value of the dose, i.e. days of training, to the individual post-treatment employment probability (the response). The dose-response function is estimated after adjusting for covariate imbalance using the generalized propensity score, a recently developed method for covariate adjustment under continuous treatment regimes. Our data have the advantage that we can consider both the actual and planned training durations as treatment variables: If only actual durations are observed, treatment effect estimates may be biased because of endogenous exits. Our results indicate an increasing dose-response function for treatments of up to 100 days, which then flattens out. That is, longer training programs do not seem to add an additional treatment effect.

Training, program evaluation, continuous treatment, generalized propensity score

Abstract:
This paper presents a meta-analysis of recent microeconometric evaluations of active labor market policies. Our sample consists of 199 program estimates drawn from 97 studies conducted between 1995 and 2007. In about one-half of these cases we have both a short-term impact estimate (for a one-year post-program horizon) and a medium-term estimate (two-year horizon). We characterize the program estimates according to the type and duration of the program, the characteristics of the participants, and the evaluation methodology. Heterogeneity in all three dimensions affects the likelihood that an impact estimate is significantly positive, significantly negative, or statistically insignificant. Comparing program types, subsidized public sector employment programs have the least favorable impact estimates. Job search assistance programs have relatively favorable short-run impacts, whereas classroom and on-the-job training programs tend to show better outcomes in the medium-run than the short-run. Programs for youths are less likely to yield positive impacts than untargeted programs, but there are no large or systematic differences by gender. Methodologically, we find that the outcome variable used to measure program effectiveness matters. Evaluations based on registered unemployment durations are more likely to show favorable short-term impacts. Controlling for the outcome measure, and the type of program and participants, we find that experimental and non-experimental studies have similar fractions of significant negative and significant positive impact estimates, suggesting that the research designs used in recent non-experimental evaluations are unbiased.

active labor market policy, program evaluation, meta-analysis

Abstract:
Numerous studies, in particular for the US, have shown that individuals in occupations with high injury risk are compensated for that risk by corresponding bonus payments. At the same time, male workers are overrepresented in the most dangerous occupations like scaffolders or miners, while females typically work in relatively safe occupations with respect to occupational injuries. It is therefore remarkable that almost all studies analyzing the gender wage gap have disregarded different occupational injury risks as a potential explanatory variable for observed gender wage differentials. By merging data on occupational injury risks to German and US panel data on individual workers, this study analyzes gender wage differentials in Germany and the US considering fatal occupational injury risk. The Blinder-Oaxaca method for tobit models is used to decompose the gender wage gap with and without consideration of the fatal injury risk. Our results indicate that the compensating wage differentials for risky jobs are reflected in the resulting gender wage gap, which is caused by the unequal distribution of occupational injury risks among men and women.

Gender wage differentials, occupational injury risk, compensating wage differentials, Blinder-Oaxaca decomposition

Abstract:
Against the background of the current discussion on the introduction of statutory minimum wages in Germany, this paper analyzes the potential employment and fiscal effects of such a policy. Based on estimated labor demand elasticities obtained from a structural labor demand model, the empirical results imply that the introduction of minimum wages in Germany will be associated with significant employment losses that are concentrated among marginal and low- and semi-skilled full-time workers. Even though minimum wages will lead to increased public revenues from income taxes and social security benefits, they will result in a significant fiscal burden, due to increased expenditures for unemployment benefits and decreased revenues from corporate taxes.

minimum wages, employment, public budget, fiscal effects

Abstract:
Against the background of the current discussion on the introduction of statutory minimum wages in Germany, this paper analyzes the potential employment and fiscal effects of such a policy. Based on estimated labor demand elasticities obtained from a structural labor demand model, the empirical results imply that the introduction of minimum wages in Germany will be associated with significant employment losses that are concentrated among marginal and low- and semi-skilled full-time workers. Even though minimum wages will lead to increased public revenues from income taxes and social security benefits, they will result in a significant fiscal burden, due to increased expenditures for unemployment benefits and decreased revenues from corporate taxes.

Minimum wages, employment, public budget, fiscal effects

Abstract:
This Paper estimates causal effects of two Polish active labour market policies - Training and Intervention Works - on employment probabilities. Utilizing data from the 18th wave of the Polish Labor Force Survey we discuss three stages of an appropriately designed exact matching procedure. The approach is illustrated using the estimated propensity score as a summary measure of balance. Distributions of pre-treatment labour market status histories show the decisive relevance of employment indicators as determinants of programme participation - a point often ignored in evaluation research. We implement a conditional difference-in-differences estimator of treatment effects based on these individual trinomial sequences of pre-treatment labour market status. Our findings suggest that Training raises employment probability, while Intervention Works seems to lead to a negative treatment effect for men. Furthermore, we find that appropriate subdivision of the matched sample for conditional treatment effect estimation can add considerable insight to the interpretation of results.

Active labour market policy, transition, exact matching, propensity score, determinants of programme participation

Abstract:
This paper provides micro-econometric evidence on the effectiveness of Active Labor Market Policies (ALMP) in Poland. We sketch the theoretical framework of matching estimators as a substitute for randomization in labor market programs. Using retrospective data from the 18th wave of the Polish Labor Force Survey we implement a conditional difference-in-differences matching estimator of treatment effects. Treatment and control groups are matched over individual observable characteristics and pre-treatment labor market histories to minimize bias from unobserved heterogeneity. We also require that observations on controls are from the same regional labor market and from an identical phase of the transition cycle. Considering as the outcome a multinomial variable of labor market status, our first important finding suggests that training of men and women has a positive effect on the employment probability. For men public works and intervention works have negative treatment effects, while participation in intervention works does not affect women's employment probabilities. We attribute the negative treatment effects for men to benefit churning rather than to stigmatization of intervention and public works participants.

Abstract:
Over the last decades many OECD countries introduced parental leave regulations in order to counteract low and decreasing birth rates. In general, these regulations aim at making parenthood more attractive and more compatible with a working career, especially for women. The recent German Elterngeld reform is one example: By replacing 67 per cent of prepartum parental labor earnings for up to 14 months after birth of the child - if both father and mother take up the transfer - it intends to i) smooth or prevent households’ earnings decline postpartum, ii) make childbearing attractive for working women while iii) keeping them close to the labor market, and iv) incentivize fathers to participate in childcare. We evaluate the reform by using a natural experiment created by the quick legislative process of the Elterngeld reform: Comparing outcomes of parents with children born shortly after and before the coming into effect of the law on 1 January 2007 yields unbiased estimates of the reform effects, because at the time when these children were conceived none of the parents knew that the regulation would be in force by the time their child is born. Our results are based on unique data from the official evaluation of the reform, which we conducted for the German government, and they show that the reform has been generally successful in attaining its objectives. In particular, we find a significant decrease in mothers’ employment probability during the 12 months after giving birth, and a significant increase in mothers’ employment probability after the Elterngeld transfer expires.

Parental leave, natural experiment, female labor market participation

Abstract:
The aggregate average unemployment rate in a given country is essentially the result of individual workers’ transitions between the three core labor force states, employment, unemployment, and inactivity. The dynamics of these transitions depend both, on individual duration in a particular state and the transition probabilities between states. Individual transitions, in turn, depend on observable and unobserved factors. Simultaneously, person-specific dynamics may be influenced by swings of the business cycle. This paper analyzes these labor force status dynamics for the East and West German labor market, separately using comprehensive data on monthly transitions from the SOEP. The results show that the experience of high unemployment rates is more sensitive to cyclical behavior for certain demographic groups, specifically unskilled and young workers. Heterogeneity in unemployment and transition rates diff er between East and West Germany, as well as between the sexes. In East Germany, all demographic cells are almost entirely detached from the cycle. Women are less influenced by the cycle in their re-employment rate from unemployment to employment.

Labor force, unemployment dynamics, business cycle, worker heterogeneity

Abstract:
Over the last decades many OECD countries introduced parental leave regulations in order to counteract low and decreasing birth rates. In general, these regulations aim at making parenthood more attractive and more compatible with a working career, especially for women. The recent German Elterngeld reform is one example: By replacing 67 per cent of prepartum parental labor earnings for up to 14 months after birth of the child - if both father and mother take up the transfer - it intends to i) smooth or prevent households' earnings decline postpartum, ii) make childbearing attractive for working women while iii) keeping them close to the labor market, and iv) incentivize fathers to participate in childcare. We evaluate the reform by using a natural experiment created by the quick legislative process of the Elterngeld reform: Comparing outcomes of parents with children born shortly after and before the coming into effect of the law on 1 January 2007 yields unbiased estimates of the reform effects, because at the time when these children were conceived none of the parents knew that the regulation would be in force by the time their child is born. Our results are based on unique data from the official evaluation of the reform, which we conducted for the German government, and they show that the reform has been generally successful in attaining its objectives. In particular, we find a significant decrease in mothers' employment probability during the 12 months after giving birth, and a significant increase in mothers' employment probability after the Elterngeld transfer expires.

parental leave, natural experiment, female labor market participation

Abstract:
Over the last decades fertility rates have decreased in most developed countries, while female labour force participation has increased strongly over the same time period. To shed light on the relationship between women’s fertility and employment decisions, we analyse their transitions to the first, second, and third child as well as their employment discontinuities following childbirth. Using new longitudinal datasets that cover the work and family life of women in the Federal Republic of Germany (FRG) and the German Democratic Republic (GDR) allows for taking into account two political regimes and drawing conclusions about the relevance of institutional factors for fertility and employment decisions. Our results suggest that in both parts of Germany women’s probability of having a first child is negatively correlated with both employment and educational achievement. Regarding second and third birth risks, this negative correlation weakens. Analysing women’s time spent out of the labour market following childbirth we find that in the East almost all mothers return to work within 18 months after birth. In the West, however, this proportion is much smaller and at the age when the child starts nursery school or school, women re-enter the labour market at higher rates. These results point to a strong influence of institutional circumstances, specifically the extent of public daycare provision. A multivariate analysis reveals a strong correlation between a woman’s employment status prior to birth and her probability of re-entering the labour market afterwards.

female labour force participation, fertility