The Marginal Benefit of an Active Labor Market Program Relative to a Public Works Program: Evidence from Papua New Guinea

Christopher Hoy and Naidoo Darian
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Naidoo Darian: World Bank, World Bank Sydney Office, Level 19, 14 Martin Place Sydney NSW 2000, SydneyAustralia

IZA Journal of Development and Migration, 2019, vol. 10, issue 1, 26

Abstract: Policymakers typically try to address youth unemployment in developing countries through either active labor market programs (ALMPs) or labor-intensive public works programs (LIPWs). We examine whether there is any additional benefit for unemployed youth from participating in a comprehensive ALMP compared to a LIPW. We exploit an unanticipated intervention in the largest employment program in Papua New Guinea, which resulted in one intake of the program completing a LIPW and missing out on a comprehensive ALMP. We conduct a difference-in-difference analysis between participants in the intake that missed out on the ALMP component of the program and participants in the intakes immediately before and after. In contrast to most impact evaluations of ALMPs, we show youth that completed the comprehensive ALMP were around twice as likely to be employed in the formal sector 9–12 months after the program compared to similar youth in the intake that only completed a LIWP. This effect was entirely driven by 20% of youth who participated in the ALMP staying with the employer they were placed with following the end of the program. Surveys of these employers illustrate that they use the ALMP as a low-cost, low-risk, and relatively low-effort way of hiring new employees.

Keywords: active labor market policy; jobs; wage subsidies; vocational training; job search (search for similar items in EconPapers)
JEL-codes: J08 J30 J68 O15 (search for similar items in EconPapers)
Date: 2019
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Persistent link: https://EconPapers.repec.org/RePEc:vrs:izajdm:v:10:y:2019:i:1:p:1839-59:n:3

DOI: 10.2478/izajodm-2019-0003

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