www.akf.dk Labour class Cost and Benefits of Danish Active Labour Market Programmes Lars Skipper Anvendt KommunalForskning (+Svend & Jakob)
Jan 18, 2016
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Cost and Benefits of Danish Active Labour Market Programmes
Lars Skipper
Anvendt KommunalForskning
(+Svend & Jakob)
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Why evaluate
Evaluation – taken seriously – represents a method for ensuring that program managers further the goals of their principals – namely taxpayers – rather than simply transferring resources to interested stakeholders, such as program operators, politically favored firms, or themselves.
In practice, many low quality evaluations exist mainly to cover up exactly such behavior;
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Why evaluate
THERE IS NO SHORTAGE OF POLICY PROPOSALS. THERE IS, HOWEVER, A SHORTAGE OF EMPIRICAL EVIDENCE ON THE EFFICACY OF THESE POLICIES…
(James Heckman )
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Why evaluate
When programs do not produce benefits in terms of economic development, finding this out allows scarce funds to flow into other, more beneficial activities, or back to the longsuffering taxpayer.
When programs do produce benefits, finding this out can generate political support for program persistence or even expansion.
Goal of Paper
Measure the net benefits of the Active Labor Market Programs in Denmark– Subtracting the programs’ cost from their
discounted stream of benefits– Benefits: Earnings gains (11 years), saved
public transfers– Cost: administration, education, training, cost
of public funds– Exclude: Value of leisure, GE-effects (such as
displacement), ex-ante effects (threat)
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Econometric Theory
Consider three types of programs:– Classroom training– Private On-the-Job Training– Public On-the-Job Training
Problem: Self-selection among participants– Participants are NINJAs! – Ashenfelter’s Dip
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Ashenfelter’s Dip
Aktiverede, 1995
-0.2-0.1
00.10.20.30.40.50.60.70.8
1988
1989
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
Kvartaler
Beskæftigelsesgrad
Treated
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Ashenfelter’s Dip
Aktiverede og Ledige, 1995
-0.2-0.1
00.10.20.30.40.50.60.70.8
1988
1989
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
Kvartaler
Beskæftigelsesgrad
Deltagere Ledige
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Econometric Theory
Selection on observable characteristics– Assumption: The decision to participate becomes
random once we condition on a set of observable characteristics
– The observed data contains variables that relate to all of the major factors identified by theory (and evidence on similar programs) as affecting both participation and outcomes
– This is potentially a very strong assumption. Cannot test it without running social experiments
Econometric Theory
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Selection on observable characteristics– Is this plausible? We base it on
1. Economic theory telling us what variables should mean something for both participation and
2. Knowledge about the institutions that affect both the selection- and outcome-processes
3. The existing knowledge in the literature, including comparisons of effects estimated based on mathcing and experimental estimates
Results
Private and public On-the-Job training come out as investments with positive returns – Net present value of quarter of a million DKK
for private and 100,000 DKK for public.– Differences in institutional set-up (public
employers cannot keep trainees after funds run out)
– Main source: Moving unemployed from passive income support to productive activity
– Main neglect: Displacement!
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Results
Classroom training comes out as a really expensive investment for the taxpayers– Net present loss of almost 100,000 DKK per
trainee– Main reason: Expensive courses wasted on
non-trainable individuals or equipping trainees with non-marketable skills
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