Active labor market programs (ALMPs) like job matching, training, wage subsidies, start-up support, and public works for the unemployed have a less than stellar reputation. “Ineffective,” “a ”charade,” and “a waste of money” are common labels one hears when discussing ALMPs; and even when positive effects of ALMPs are acknowledged, the sizes of these effects are portrayed as too small to bother. At the same time, these programs are widely used, not only in high-income countries, but also in many developing countries—often with the hope that they solve many labor market problems, in particular, unemployment. Are policymakers wrong to pursue these programs?
This is the sixth in this year’s job market series
Labor misallocation is believed to be a key driver of differences in income across countries (Hsieh and Klenow 2010). However, the causes of this misallocation are not always well understood and there is little evidence on what interventions can improve the allocation of workers in the economy. These issues are particularly important in Sub-Saharan Africa, where worker mobility from low to high productivity sectors is often limited (McMillan, Rodrick and Verduzco-Gallo 2014).
My job market paper provides new experimental evidence from Ethiopia showing that subsidizing job applications can reduce inefficiencies in the allocation of workers’ talent.
One popular solution to unemployment is to provide the unemployed with more skills through training. However, the impacts of vocational training in developed countries have been at most modest.
In a recent post, I described a randomized experiment in Jordan that I (along with Matt Groh, Nandini Krishnan and Tara Vishwanath) have been working on.
I’ve been working for the last couple of years with Tara Vishwanath, Nandini Krishnan and Matt Groh on a pilot program in Jordan which aims to get young women just graduating from community college into work. Today I want to describe what we did, and ask you to predict the results – which I will then share in a subsequent blog post.