Kluve, Jochen Lehmann, Hartmut Schmidt, Christoph M.
Year of Publication:
Quaderni - Working Paper DSE 620
This paper estimates treatment effects of two active labor market policies – a training program and a wage subsidy scheme – on participants' employment probabilities. The analysis is based on unique data from the 18th wave of the Polish Labor Force Survey containing detailed and extensive individual labor force status histories. We discuss two variants of an exact covariate matching procedure adapted to the specific nature of the data. Our study confirms and reinforces a point raised in recent research (Heckman and Smith 1999, 2004), that pre-treatment labor force status dynamics play a decisive role in determining program participation. We implement a conditional difference-in-differences estimator of treatment effects based on these individual trinomial sequences of pretreatment labor market status. The estimator employs a "moving window" technique that nicely controls for changes in the macroeconomic environment over time. Our findings suggest that training raises individual employment probability, while wage subsidies display negative treatment effects for participants in the Polish case.