Scandinavian Working Papers in Economics

Working Paper Series,
IFAU - Institute for Evaluation of Labour Market and Education Policy

No 2008:26: The effect of active labor market programs on not-yet treated unemployed individuals

Gerard J. van den Berg (), Annette Bergemann and Marco Caliendo
Additional contact information
Gerard J. van den Berg: VU University Amsterdam, Postal: De Boelelaan 1105, 1081 HV Amsterdam, The Netherlands
Annette Bergemann: VU University Amsterdam
Marco Caliendo: IZA

Abstract: Labor market programs may affect unemployed individuals' behavior before they enroll. Such ex ante effects are hard to identify without model assumptions. We develop a novel method that relates self-reported perceived treatment rates and job-search behavioral outcomes, like the reservation wage, to each other, among newly unemployed workers. Job search theory is used to derive theoretical predictions. To deal with effect heterogeneity and selectivity, the effects of interest are estimated by propensity score matching. We apply the method to the German ALMP system, using a novel data set including self-reported assessments of the variables of interest as well as an unusually detailed amount of information on behavior, attitudes, and past outcomes. We find that the system generates a negative ex ante effect on the reservation wage and a positive effect on search effort.

Keywords: Policy evaluation; reservation wage; search effort; expectations; unemployment duration; program evaluation; active labor market policy; identification

JEL-codes: J64

20 pages, November 15, 2008

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