How Effective are Active Labor Market Policies in Developing Countries? A Critical Review of Recent Evidence

By David J. McKenzie. Social Science Research Network, 2017

304 citations recorded by the source corpus.

Jobs are the number one policy concern of policy makers in many countries. The global financial crisis, rising demographic pressures, high unemployment rates, and concerns over automation all make it seem imperative that policy makers employ increasingly more active labor market policies. This paper critically examines recent evaluations of labor market policies that have provided vocational training, wage subsidies, job search assistance, and assistance moving to argue that many active labor market policies are much less effective than policymakers typically assume. Many of these evaluations find no significant impacts on either employment or earnings. One reason is that urban labor markets appear to work reasonably well in many cases, with fewer market failures than is often thought. As a result, there is less of a role for many traditional active labor market policies than is common practice. The review then discusses examples of job creation policies that do seem to offer promise, and concludes with lessons for impact evaluation and policy is this area.

Subfields: Economics and Econometrics, General Health Professions

View Paper: https://www.semanticscholar.org/paper/c18c90434d4fe8085ec2ad806225b9417afcfe82

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Citations in the corpus

The effectiveness of active labour market policies: A meta-analysis (2019, unknown): “Reviews by Crépon and van den Berg (2016) and McKenzie (2017) also highlight that ALMPs turn out to be far less effective than expected.”
The effects of cash transfers on adult labor market outcomes (2018, background): “…getting individuals to start firms, or to invest in growing their firms to earn higher profits and increase survival.15 Fafchamps et al. (2014) and McKenzie (2017b) note that an unconditional grant given to a firm owner facing no liquidity constraints would be predicted to have no effect on these…”
The Impact of Trade on Inequality in Developing Countries (2017, unknown): “The policies might not have been effective because places and sectors that were targeted by the programs ultimately were not places that had a current demand for workers (McKenzie 2017).”
The Microfinance Business Model: Enduring Subsidy and Modest Profit (2016, methodology): “…six microcredit studies in Banerjee, Karlan, and Zinman (2015) are first compared with those from seven studies of training programs in table 1 of McKenzie (2017) that reported (1) program cost and (2) the resulting change in monthly income, and that had (3) a time frame from baseline to endline…”