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Labour Market Policy and Unemployment

Impact and Process Evaluations in Selected European Countries

Edited by Jaap de Koning and Hugh Mosley

This book examines the effectiveness of active labour market policies and their contribution to the prevention of social exclusion. The evaluation studies reported in this volume focus on two aspects of active labour market policies that have been relatively neglected in previous research and merit special attention.
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Chapter 4: Does active labout market policy matter? An aggregate impact analysis for Germany

Günther Schmid, Stefan Speckesser and Christoph Hilbert


4. Does active labour market policy matter? An aggregate impact analysis for Germany Günther Schmid, Stefan Speckesser and Christoph Hilbert1 INTRODUCTION This chapter investigates the impact of German active labour market policy (ALMP) on long-term unemployment. Extended periods of unemployment frequently lead to social exclusion. We are therefore interested in finding out whether ALMP can prevent social exclusion and contribute to social integration. Our empirical analysis is based on two methodological approaches: a structural equation model and a matching model based on the aggregate impact analysis (AIA) model outlined in Bellmann and Jackman (1996a). It uses regional employment offices (REO) in Germany as units of observation. The effect of ALMP is measured on aggregate indicators such as the level, structure or change in long-term unemployment and the outflow rate of unemployment in the regions. REO are the operative units of the German federal employment office (FEO) in Nuremberg, which is responsible for administering unemployment insurance and ALMP. Despite central regulation, REO have considerable discretion both in choosing the mix of policies (‘portfolio’) as well as in implementing them. Our objective is to operationalize these variations and to test whether they matter in the fight against long-term unemployment. We are seeking the ‘intelligent portfolio’ or policy mix of ALMP for regional labour markets. A further advantage of AIA compared with individual impact analysis is that to some extent (at least indirectly) it captures displacement, substitution, deadweight and multiplier effects. We will begin with a brief report on...

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