What Works for Active Labor Market Policies?

CID Faculty Working Paper No. 358

Eduardo Levy Yeyati, Martin Montane, and Luca Sartorio
July 2019

Abstract:

The past 5 years have witnessed a flurry of RCT evaluations that shed new light on the impact and cost effectiveness of Active Labor Market Policies (ALMPs) aiming to improve workers´ access to new jobs and better wages. We report the first systematic review of 102 RCT interventions comprising a total of 652 estimated impacts. We find that (i) a third of these estimates are positive and statistically significant (PPS) at conventional levels; (ii) programs are more likely to yield positive results when GDP growth is higher and unemployment lower; (iii) programs aimed at building human capital, such as vocational training, independent worker assistance and wage subsidies, show significant positive impact, and (iv) program length, monetary incentives, individualized follow up and activity targeting are all key features in determining the effectiveness of the interventions.

Keywords: Vocational training, labor policies, wage subsidies, randomized controlled trials
JEL Classifications: J21, J48, E24
Affiliated Program: Growth Lab