52nd Congress of the European Regional Science Association: "Regions in Motion - Breaking the Path", 21-25 August 2012, Bratislava, Slovakia
This study evaluates a regional full employment initiative using the synthetic control method introduced by Abadie and Gardeazabal (2003). The aim of the Paltamo Full Employment (PFE) experiment launched in 2009 is to reverse the trend of high and persistent unemployment in contracting regions. The basic idea behind the experiment is to collect all unemployment related expenditures together and use them in employing all unemployed persons. According to our results, the PFE-experiment has managed to lower the unemployment rate in Paltamo by almost 10 percentage points in just two years time during an era of global financial crisis. The costs of this remarkable drop in unemployment were 3.4 million Euros in 2010. The results show that one fifth of this amount is covered by reduced expenditures on unemployment allowances and housing allowances.