The Employment Effects of Public Training Programme : Evidence from Latvian Micro and Macro Data

Mardi | 2009-02-03


During the transition to market economy and the accession to the EU Central and EasternEuropean countries have witnessed remarkable changes in the structure and functioningof national economies. The aim of this paper is to investigate the role of active labourmarket policy (ALMP) programmes in smoothing the consequences of transitional shockand improving the performance of the labour market. We evaluate the employment ef-fects of publicly provided unemployed training programme in Latvia from both micro andmacroeconomic perspectives.First, the individual effects of the programme are assessed. Using the individual dataprovided by State Employment Agency of Latvia, we investigate the impact of participa-tion on unemployed transitions to jobs, examine heterogeneity of treatment effects acrossdifferent socio – demographic and regional groups and examine the empirical link betweentargeting of the programme and its efficiency. We also test the sensitivity of our results tothe so called ”hidden” bias.Next, the aggregate impact on the outflows from unemployment to jobs is analyzed usingmonthly panel data (1999-2006) data from 33 Latvian districts. The analysis is performedby estimating the augmented matching function, where the correct specification of thehiring process is obtained by allowing for stock-flow matching. The results allow to quan-tify the aggregate outcomes of training and to assess temporal evolution in programmeefficiency (by comparing pre EU accession to post accession periods) or its regional distri-bution. The estimation results are further employed to perform a costs-benefit analysis ofthe programme.Generally, the effects of unemployed training are confirmed to be positive at both macroe-conomic and individual levels: involvement of unemployed in training increases aggregateoutflows from unemployment to jobs and increases individual employability of participants.