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This paper discusses the case for expanding active labor market policy in recession. We find that there is reasonable case for relying more heavily on certain kinds of programs. The argument is tied to the varying size of the lock-in effect in boom and recession. If programs with relatively large lock-in effects should ever be used, they should be...
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Context 1
... effects of treatment are fundamentally different while taking part in the program and after program completion. Figure 2 graphs two examples of hypothetical treatment effects for a given set of individuals. The two programs differ in terms of intensity. ...
Context 2
... provide the illustration in Figure 2 to make clear how we think one should estimate the treatment effects. Having said this one should note that this is not how it is always done in the literature. ...
Context 3
... reason for showing the example in Figure 2 is that we want to use the terminology we have introduced later on. Therefore, we will use lock-in effects to refer to the treatment effects while taking part in the program, and post-program effects to refer to the treatment effects after program completion. ...
Citations
... The rationale for such a shift in the activation mix is that the opportunity costs of investing in training for the unemployed, especially those at high risk of long-term unemployment, fall during a steep downturn as the exit rates from unemployment to a job decline. There is some limited econometric evidence from the Nordic countries that suggests it is worthwhile to shift the stance of activation policies toward greater investment in long-duration training during a steep downturn (see Forslund et al. 2011;Norlund 2009). But it is not easy to accept this argument uncritically. ...
This chapter summarizes and discusses developments and policy changes in the public disability benefit systems of five countries of the Organisation for Economic Cooperation and Development (OECD)—the Netherlands, Sweden, Great Britain, Germany, and Australia—over the past five decades. All five countries experienced substantial increases in their disability recipiency rates (beneficiaries as a share of the working-age population) at some point after 1970, followed by plateaus and, eventually, declines. This pattern reflects a commonality in the evolution of their disability benefit policies: a period of expanding eligibility standards and/or benefits was followed by rising recipiency rates. These rising rates triggered policy reforms that tightened eligibility standards and/or benefits again, which reduced growth rates and, eventually, recipiency rates.
... That's the reason for which increasing awareness of the need to develop scientifically justified measures of ALMP effectiveness has become a key element in OECD employment policy guidelines. However, abundant literature has been devoted, as we know, to ALMP assessments that have been largely focused exclusively on more concrete outcomes such as unemployment rate, employment rate, wage levels, etc. (Card, Kluve and Weber, 2010;Kluve, 2010;Forslund, Fredriksson and Vikström, 2011;Martin, 2015;Escudero, 2018;Hur, 2019;Sahnoun and Abdennadher, 2018a;2018b;2021). To track progress, inform and evaluate employment policies, governments are attempting to consider the use of subjective welfare measures. ...
... The results could have been better if ALMP's funding, timing and design as well as the implementation of flexicurity measures were better adapted to the economic circumstances. Considering that the job-search assistance and monitoring are not timeconsuming, Forslund et al. (2011) intuitively suggest that these ALMPs should be more widely promoted when the economy is booming, which does not seem to be currently the case in Sweden. Lower employment rates are associated with a higher probability of UB reception under work experience schemes, which was at the core of Swedish LMP in times of crisis. ...
Sweden has adopted an Active Labour Market Policy as a means of transitioning out of the economic crisis created by the 2020 COVID-19 pandemic. The approach is to a significant extent reminiscent of that adopted following the 2008 Global Financial Crisis (GFC). The article examines the effectiveness of active labour market policy in Sweden over the period 2007–2012. By analysing these earlier policy outcomes, the aim is to assess the success of active labour market policy more broadly. The hypothesis that greater labour market flexibility allows the labour market policy to be more efficient is evaluated. With a focus on the labour supply, possible reasons for the reduced efficiency of state interventions are outlined using regression models. Conclusions derived from the models point to the failure of earlier Swedish active labour market policy towards the vulnerable groups of the unemployed, unemployed women and men aged 15–19 years and the long-term unemployed.
JEL Codes: J08, J21, J64
... Z hlediska sociální politiky je někdy tato otázka též interpretována jako otázka, zda by pro konkrétní uchazeče nebyla lepší účast v jiném typu programu (Lechner a Wunsch, 2009). Forslund et al. (2011) ovšem upozorňují, že charakteristiky populace nezaměstnaných osob se v různých obdobích odlišují a v návaznosti na to mohou být i jednotlivé programy v různých obdobích různě cíleny. ...
... v závislosti na období ekonomického cyklu (viz např. Forslund et al., 2011). Je ovšem třeba reflektovat, že možnost zodpovědět takto položenou otázku za pomoci individuálních dat, jaká máme k dispozici, je omezená, neboť neznáme celkové efekty na trh práce a ani nemůžeme dobře odhadovat efekt programu na jejich libovolné účastníky (na populaci -tzv. ...
... 14 Proto je mezi evaluátory tendence měřit efekty od počátku trvání programu (viz např. Caliendo a Kopeinig, 2005;Forslund et al., 2011). Tento přístup využíváme i v naší studii. ...
Předkládaná evaluační studie se zabývá vybranými programy APZ, jež byly poskytnuty uchazečům o zaměstnání v roce 2014. Ve studii jsou sledovány programy Odborných praxí pro mladé lidi do 30 let, rekvalifikace, společensky účelná pracovní místa a veřejně prospěšné práce. Kromě jejich dopadu na zaměstnanost se studie zaměřuje na analýzu opatření z hlediska cílenosti (tj. ke kterým skupinám nezaměstnaných byly jednotlivé programy směřovány) a z hlediska řešení dlouhodobé nezaměstnanosti. Cílenost a dopady programů na účastníky vyhodnocuje na základě dat o všech uchazečích o zaměstnání evidovaných Úřadem práce ČR. Na základě provedené analýzy se celkově jeví účinnost programů APZ jako dobrá, zejména pokud jde o účinky SÚPM, a v případě dlouhodobě nezaměstnaných. Účinnost programů Praxe pro mladé do 30 let, Rekvalifikace a VPP na odchod z registru se také částečně projevuje, ale není ve srovnání s kontrolní skupinou příliš výrazná. V případě Praxí pro mladé a Rekvalifikací to lze chápat též jako důsledek nízké cílenosti k více znevýhodněným uchazečům, v případě VPP je to důsledek charakteristik programu (záměrně jde jen o dočasné umístění).
... Three previous studies have investigated ALMP effectiveness over the business cycle. Kluve (2010) uses between-country variation in a small European meta data set, whereas Lechner and Wunsch (2009) and Forslund, Fredriksson, and Vikström (2011) analyze programs in Germany and Sweden, respectively. All three studies suggest a positive correlation between ALMP effectiveness and the unemployment rate. ...
We summarize the estimates from over 200 recent studies of active labor market programs. We classify the estimates by type of program and participant group, and distinguish between three different post-program time horizons. Using regression models for the estimated program effect (for studies that model the probability of employment) and for the sign and significance of the estimated effect (for all the studies in our sample) we conclude that: (1) average impacts are close to zero in the short run, but become more positive 2–3 years after completion of the program; (2) the time profile of impacts varies by type of program, with larger average gains for programs that emphasize human capital accumulation; (3) there is systematic heterogeneity across participant groups, with larger impacts for females and participants who enter from long term unemployment; (4) active labor market programs are more likely to show positive impacts in a recession. (JEL: J00, J68)
... However, macro-economic conditions were also shown to influence the flows in and out of the state ''Disabled''. Although the costs for labour market policies as well as the distribution between different activities have varied over time, the general access of individuals to employment activities and unemployment insurances have not changed throughout the studied period (Forslund et al. 2011). ...
Associations between unemployment, work, and disability have been researched in many studies. The findings are often based on cross-sectional data and single outcomes. The present study analysed multiple outcomes over a period of 15 years among long-term unemployed individuals. Based on all individuals aged 20–40 living in Sweden in 1995, prospective cohort analyses were conducted. Individual annual labour market proximity 1995–2010 was estimated and categorised into three mutually exclusive categories: “Jobless”, “Self-sufficient” (i.e. main income from work), or “Disabled”. Individuals in the category “Jobless” (n = 638,622) in 1995 constituted the study population. Using autoregressive multinomial logistic regression, transitions between the three states during 1997–2010 were analysed. Socio-economic factors, previous inpatient care, and national unemployment rates in different time periods were included in the regression models. Among those “Jobless” in 1995, 17 % were also “Jobless” in 2010, while 10 % were “Disabled” and 61 % “Self-sufficient”. The transitions were stable over time periods for transitions into “Self-sufficient” and “Disabled” but less so for “Jobless”. Previous state was the best predictor of subsequent state. “Jobless” individuals with previous morbidity had a higher transition probability into “Disabled” and a lower transition probability into “Self-sufficient”. The transition rates into “Self-sufficient” were higher in periods with lower unemployment levels. The study supports the interpretation that return to work was affected both by the individuals’ previous health status and by the national unemployment level. Transition from being “Jobless” into “Disability” may be influenced by previous ill health and by negative health effects of being “Jobless”.
... Despite much discussion on the extent to which active labour-market policies in general have different effects over the cycle, empirical work on whether LTP-impacts are business-cycle dependent is also scant. Few micro-level studies exist, focusing on how cyclical fluctuations in aggregate unemployment or other relevant indicator affect the job-entry probabilities of program participants, and the results are mixed (Raaum et al., 2002;Røed & Raaum, 2006;Staghøj et al., 2007;Lechner & Wunsch, 2009;McVicar & Podivinsky, 2010;Forslund et al., 2011;Nordlund, 2011;Crépon et al., 2013;Card et al., 2015). For example, while the evidence reported in Røed & Raaum (2006), McVicar & Podivinsky (2010) and Crépon et al. (2013) suggest that program-outcomes are less positive when aggregate unemployment is higher or business-cycle conditions are unfavourable, the results found in Lechner & Wunsch (2009), Forslund et al. (2011 and Card et al. (2015) indicate that program effects are more positive when unemployment is higher. ...
... Few micro-level studies exist, focusing on how cyclical fluctuations in aggregate unemployment or other relevant indicator affect the job-entry probabilities of program participants, and the results are mixed (Raaum et al., 2002;Røed & Raaum, 2006;Staghøj et al., 2007;Lechner & Wunsch, 2009;McVicar & Podivinsky, 2010;Forslund et al., 2011;Nordlund, 2011;Crépon et al., 2013;Card et al., 2015). For example, while the evidence reported in Røed & Raaum (2006), McVicar & Podivinsky (2010) and Crépon et al. (2013) suggest that program-outcomes are less positive when aggregate unemployment is higher or business-cycle conditions are unfavourable, the results found in Lechner & Wunsch (2009), Forslund et al. (2011 and Card et al. (2015) indicate that program effects are more positive when unemployment is higher. ...
... Moreover, even among micro-level studies focusing on the labour-market impact of training programs, empirical evidence on whether or not LTP effects are influenced by the extent of structural change is extremely limited. In an attempt to determine who is losing jobs, only Forslund et al. (2011) classifies employment-changes in industry as structural or cyclical depending on the extent to which overall employment also changes before and after a turning point. Potential influences arising from the opening-up of markets at the global level are also in general neglected. ...
Empirical work on the effects of government-sponsored labour-market training programs (LTPs) has been largely focused on the unemployment-exit and employment-entry probabilities of program participants using micro-level data. This paper seeks to add to the current literature by providing broad cross-country evidence on whether or not additional public-sector resources allocated to LTPs contributes to raising output growth and per-capita incomes. Using data from OECD countries during 1989-2009 and GMM estimation, we find evidence suggesting that on average labour-market training programs are growth-enhancing. The positive growth-effect of LTP-spending is found to be stronger the more favourable are business-cycle conditions, the larger is the magnitude of structural shocks at country level and the greater is the scale of opening-up of markets at the global level.
... They find that the effects of labor market training on their participants' earnings become smaller during recession, especially for foreigners. This is somewhat contradicting later evidence for Sweden (Forslund et al., 2011) and for Germany (Lechner and Wunsch, 2009) but it might be explained by effect heterogeneity. Older and high-skilled workers seem to benefit more during good times, while younger and low-skilled workers benefit more during bad times. ...
... However, since she only reports effects 1 year after program start, there is no information regarding potential differences in locking-in effects, which are much larger for training according to Forslund et al. (2013). Forslund et al. (2011) compare the relative performance of job practice and labor market training over the business cycle. They use data for the period 1999-2005 and apply a combination of nearest neighbor propensity score matching and Cox regressions in a design that exploits time and regional variation in the business cycle. ...
... After 2 years, labor market training increases the exit rate from unemployment to employment by almost 5% during a recession and 3% during a boom compared to job practice. In line with Lechner and Wunsch (2009), who investigate the business cycle dependence of the effects of training for Germany, Forslund et al. (2011) conclude that training should be used counter-cyclically, because the indirect costs of training in the form of locking-in effects are considerably smaller. They also confirm the result of the earlier study for Germany that lower locking-in effects during recessions coincide with larger positive long-run effects. ...
This chapter considers the literature on government-sponsored vocational training for adults, with a particular substantive focus on training provided via active labor market programs and a particular geographic focus on Western Europe and North America. We begin with a discussion of the underlying economic theory of investment in human capital over the life cycle and of government intervention in that process, along with models of participation in government programs and in particular services within those program. Building on the theory as well as on institutional knowledge and well-known empirical regularities related to participation in training, we then lay out the common applied econometric approaches to estimating the impacts of government-sponsored training for adults and consider important design and measurement issues common to studies in the empirical literature. Six case studies that consider the institutions and evaluation literatures in the United States, the United Kingdom, Germany, France, Sweden, and Denmark come next. These countries all provide a rich base of compelling empirical evidence and also serve to illustrate a wide variety of institutional choices and applied econometric methodologies. The penultimate section considers what we know about matching potential trainees to training and to particular training types, an important topic in light of the strong evidence of heterogeneity in treatment effects provided by the case studies. The final section summarizes the literature and its limitations and offers suggestions for future research.
... It is worth to note that the vocational training programs also includes an on the job training component and that incentives are given to the training center to improve the link with firms. (Bell & Orr 1994, Cave et al. 1993; however, Forslund et al. (2011) provide an analysis for a program in Sweden. Cave et al. (1993) show that the JOBSTART subsidized employment program had a weak positive impact on total earnings for participants but led to a large increase in taxpayer expense and represented a net loss for society as a whole. ...
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.
... 2 A few studies compare the economic efficiency between other training programs, job search assistance, public employment, and/or wage subsidies (Lechner et al. 2011, Kluve 2010, Card et al. 2010; for Sweden, see Forslund et al. 2011 andForslund et al. 2013). 3 The average costs of the LMT would be SEK 33,300 [(141/360)*85000] compared with SEK 45,900 for the AEI if one assumes 1.35 years in Komvux on average. ...
Training programs for the unemployed typically involve training specific skills in demand amongst employers. In 1997, Swedish unemployed could also choose general schooling at the upper secondary level. This offers a unique opportunity to assess the theoretically ambiguous long-term relative earnings of general vs. specific training for unemployed. Analyzing detailed administrative data 1990–2010, we find 1) that specific training is associated with higher earnings in the short run, 2) that earnings converge 5–7 years post program and 3) that individuals act on their comparative advantages. When we extrapolate our estimates to life-time earnings, there is overall a relative advantage of specific training. However, for females with limited prior education, we find a relative life-time earnings advantage of general training.
JEL-codes: I21, J62, J68
