Abstract
With the beginning of economic reform in the formerly centrally planned economies of Central and Eastern Europe (CEE), open unemployment rapidly reached levels comparable to those in Western economies. Governments in the region reacted to this rise by adopting active labour market policies (ALMP) as an important tool in the fight against unemployment. Before reviewing the evidence on the efficacy of such policies we look at the scope and the rationale of ALMP measures in a transitional context. Since government budgets are very tight in these countries it is important to evaluate ALMP in a rigorous fashion. The paper analyses macroeconometric and microeconometric methods of program evaluation as they were applied in transition economies. Both these approaches have a raison d’être and should be understood as complementing. Providing a selective review of the literature, it is possible to highlight some of the strengths and the pitfalls of the two approaches. We also point to the lessons one can draw from the surveyed studies for a better understanding of how active measures affect labour market outcomes in this set of countries.
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Notes
- 1.
- 2.
Several important studies have been undertaken evaluating the efficacy of ALMP in East Germany. Since we consider East Germany’s transition to a market economy a special case distinct from the experiences of other countries of Central and Eastern Europe, these studies will not be considered here.
- 3.
The determination of the stock of unemployment by the outflow rate is a contentious issue. For example Burgess (1989), highlights the importance of inflows in the British case.
- 4.
The average search effectiveness s crucially depends on the duration structure of unemployment and thus varies over time.
- 5.
In large, mature capitalist economies, constant returns to scale are often assumed (see for example Jackman and Layard 1991).
- 6.
Boeri shows that with his high frequency data increased inflows into unemployment are positively correlated with higher ALMP expenditures as well as with higher outflow rates, thus producing an upward bias of OLS estimates. The scenario of increased ALMP expenditures due to a decrease in outflow rates mentioned in the text would instead result in a downward bias.
- 7.
The reader is referred to the detailed description in Vodopivec (1999).
- 8.
Random assignment is assured in this experiment since claimants with odd birthdays were assigned to treatment while claimants with even birthdays to the control group.
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Acknowledgements
Lehmann thanks the Volkswagen Foundation for financial support within the project “The political economy of labor market reform in transition: A comparative perspective”.
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Lehmann, H., Kluve, J. (2010). Assessing Active Labour Market Policies in Transition Economies. In: Caroleo, F., Pastore, F. (eds) The Labour Market Impact of the EU Enlargement. AIEL Series in Labour Economics. Physica-Verlag HD. https://doi.org/10.1007/978-3-7908-2164-2_11
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