Labor EconomicsLabor Market Policies.
Pierre Cahuc/Sebastien Roux
ENSAE-Cours MTPE
December 12th 2007
Pierre Cahuc/Sebastien Roux (ENSAE) Labor Market Policies December 12th 2007 1 / 45
Introduction
Introduction
Justification of Intervention of State :
Political objectivesMarket failures
Two forms of State intervention1 Active policies : Increase employment and wages of persons who have
difficulties to enter the Labour MarketExamples : Job Search assistance, Training, Employment subsidies...
2 Passive policies : Increase the welfare of disadvantaged populationswithout trying to improve their Labour Market performancesExamples : Unemployment Insurance, provisions for early retirement
Pierre Cahuc/Sebastien Roux (ENSAE) Labor Market Policies December 12th 2007 2 / 45
Introduction
Effects of Labour Market Policies
Obvious Incentive problems with passive policies.
But Active policies are not always“good”and passive policies “bad”
Some active policies may be counterproductive :
Creation of public sector jobs can, because of cost and low efficiency,lead to a decline in the total number of jobs.Subsidies to promote some employment types can introduceunexpected distortions.
Some passive policies may be efficient :
Increase in unemployment benefits may reduce the number ofunemployed when not all workers are eligible.Financial compensation for unemployment may improve efficiency byimproving the quality of matches, letting more time for unemployed toget better jobs.
Pierre Cahuc/Sebastien Roux (ENSAE) Labor Market Policies December 12th 2007 3 / 45
Introduction
Outline
1 Definition of Labor Market Policies2 Theoretical Analyses
1 Manpower Services2 Subsidizing low wage jobs
3 Evaluation of Labor Market Policies1 Baseline framework2 Evaluation of low-wage payroll reduction
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Definition of Labor Market Policies
Definition of Labor Market Policies
OECD Classification of Active Policies :
Public Employment Services : ANPE
Labor Market training,1 Training for unemployed adults (or similar...)2 Training for employed adults
Youth employment and training measures1 For the unemployed and disadvantaged2 Apprenticeship or Youth training
Subsidized Employment1 Subsidies for private sector Employment2 Helps for unemployed persons in launching new firms3 Direct Job creation in the public sector
Pierre Cahuc/Sebastien Roux (ENSAE) Labor Market Policies December 12th 2007 5 / 45
Definition of Labor Market Policies
Employment programs for the disabled1 Professional rehabilitation2 Jobs oriented to disabled
Passive Policies :
1 Unemployment Insurance
2 Early retirement for reasons connected to the labour market
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Definition of Labor Market Policies
Improving the Labor Market
Public Employment Services : Reduction of the search costs.
US Employment service or ANPE. Also private agencies in somecountries. All Job Search Assistance programs (JSA)
Labor Market Training : Increasing“Employability” (see Denmark orGermany)
Classroom training : brief duration, industry or firm-specific, mayimprove general human capital.
Youth Employment and training.
Apprenticeship, programs helping young people who leave school early(Ex : Job corps in the USA)Other measures : On-the-job training. Incentives for firms to train theiremployees with general human capital.
Pierre Cahuc/Sebastien Roux (ENSAE) Labor Market Policies December 12th 2007 7 / 45
Definition of Labor Market Policies
Reduction of Labor Cost or Direct Creation of jobs
Transfers to firms that hire members of particular groupsExamples : Reduced payroll taxes for low wage jobs, Public serviceemployment.
Some remarks
Subsidized employment non-existent in the US.Distinguish between temporary and permanent Civil Service jobs.One individual can enter in different programs.Distinguish between active and passive labor market policies issometimes difficult (cf. Netherlands with Disabled)
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Definition of Labor Market Policies
Public expenditure on labor market policies
Total Passive Active Passive/Country Year Expenditure Expenditure Expenditure ActiveAustralia 2000-01 1.43 0.98 0.46 2.13Canada 2000-01 1.13 0.72 0.41 1.76Denmark 2000 4.56 3 1.56 1.92France 2000 2.96 1.65 1.31 1.26Germany 2001 3.13 1.92 1.2 1.60Japan 2000-01 0.86 0.55 0.31 1.77Netherlands 2001 3.44 1.86 1.58 1.18Norway 2001 1.23 0.44 0.79 0.56Sweden 2001 2.28 1.19 1.09 1.09United Kingdom 1999-2000 0.92 0.56 0.36 1.56United States 2000-01 0.45 0.3 0.15 2.00
Source : OECD
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Definition of Labor Market Policies
Structure of expenditures
YouthPublic Labor employment Employment
Employment Market and training Subsidized programs forCountry Year Service Training measures employment the disabledAustralia 2000-01 44.4 4.4 15.5 24.4 11.1Canada 2000-01 41.5 41.5 4.9 7.3 4.9Denmark 2000 7.6 54.1 6.4 10.8 21France 2000 13.7 19.1 32.1 28.2 6.9Germany 2001 19.2 28.3 7.5 20.8 24.2Japan 2000-01 62.5 9.4 - 25 3.1Netherlands 2001 16.5 19.7 2.5 24.2 36.9Norway 2001 15.2 7.6 1.3 1.3 74.7Sweden 2001 20.9 27.3 1.8 21.8 28.2United Kingdom 1999-2000 36.1 13.9 41.7 2.8 5.5United States 2000-01 26.7 26.7 20 6.7 20
Source : OECD
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Theoretical Analyses of Active Policies
Theoretical Analysis : Manpower services
Equilibrium model accounting for Labor demand, wages and possibleMarket unefficiencies : the Matching model
Note that, most often, the way the reforme is financed and how itaffects the outcome is not examined : we want to focus on the directeffect of the reform.
Here, example of manpower services. Double mission :
Registering unemployed and checking whether they are indeed lookingfor a job.Gathering job offers and job demands and thus reduce search costs
Hence their existence is justified by moral hazard and the reduction ofsearch inefficiencies
Its being public may be justified by its fixed cost and its relying onlarge networks (externalities).
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Theoretical Analyses of Active Policies
A matching model with Placement Agencies, Yavas(1994)
Idea : An placement agency ensures a better match-up betweenunemployed and vacant jobs.
Alternative matching technology with increasing returns (networkeffect) and a specific cost.
Formalization :
Let x ∈ [0; 1] the share of unemployed persons resorting to placementagencies.
i ∈ [0, a] continuum of agencies. a is the number of agencies.Simplifying assumptions :
Agencies are uniformly distributedThey are instantaneously able to locate vacancies
c (xi ) is the cost attached to the placement of xi individuals byagency i
c (xi ) = c0 (a) + cv (xi ) where c0() is a fixed cost (c0(0) ≤ 0 c ′′0 > 0,
congestion) and cv () is a variable cost (cv (0) = 0, c ′′v > 0)
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Theoretical Analyses of Active Policies
Adapted Beveridge Curve
Unemployed u ∈ [0, 1] are the ones who do not resort to agencies
Matching function M (u, v), v are vacancies
θ = v/u is the labor market tightness, such as θm (θ) is the exit rateout of unemployment.
q is the exogenous destruction rate of jobs
At steady-state, flows balance
q (1− u) = x + θm (θ) u
where x =∫ a0 xidi .
Hence, x = q (1− u)− θm (θ) u, Beveridge curve.
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Theoretical Analyses of Active Policies
Social Optimum in the presence of placement agencies
To simplify, we consider r → 0
y is the productivity of employed
z is the domestic production of unemployed
Instantaneous aggregate production : (1− u) y + zu
Total relevant cost : huθ +∫ a0 c (xi ) di where h is the cost of a vacant
job.
Total profit : ω = (1− u) y + zu − huθ −∫ a0 c (xi ) di
Using the Beveridge Curve, we get :
ω = −∫ a
0[c0(a) + cv (xi )] di + y −
(q −
∫ a0 xidi
)(y − z + hθ)
q + θm (θ)
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Theoretical Analyses of Active Policies
Planner’s problem : maxxi ,a,θ
ω
Can be solved in two steps :1 V ∗ = min
θ
y−z+hθq+θm(θ)
2 maxxi ,a
(−
∫ a
0[c0(a) + cv (xi )] di + y −
(q −
∫ a
0xidi
)V ∗)
The first step brings :
(y − z) (1− η (θ))
q + η (θ) m (θ) θ=
h
m (θ)
with η (θ) = − θm′(θ)m(θ)
The second step brings
c ′v (xi ) =
y − z + hθ
q + θm (θ)=
h
(1− η (θ))m (θ)
and
ac ′0 (a) + c0 (a) + cv (xa) = xa
y − z + hθ
q + θm (θ)
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Theoretical Analyses of Active Policies
Decentralized Equilibrium with Private Agencies
Let pv the price for firms and pu the price for unemployed whenresorting to these agencies.
Hence a firm turns to an agency if its gain exceeds Πe − pv . Atequilibrium, Πv = Πe − pv . At free entry, Πv = 0. Hence Πe = pv .
Same reasoning for Unemployed : Vu = Ve − pu, i-e pu = Ve − Vu
Wage bargaining such that employees get a share γ ∈ [0; 1] of thesurplus S = Πe − Πv + Ve − Vu.
Free entry condition leads to Πe = hm(θ) and the sharing rule to
(1− γ) (Ve − Vu) = γΠe . Hence
pv =1− γ
γpu =
h
m (θ)
Perfect competition between agencies : take pu and pv as given.Decentralized choice of xi , solution of max
xi
(pu + pv ) xi − c (xi )
Pierre Cahuc/Sebastien Roux (ENSAE) Labor Market Policies December 12th 2007 16 / 45
Theoretical Analyses of Active Policies
Hence, c ′v (xi ) = pv + pu = h
(1−γ)m(θ)
Free Entry for agencies lead to :
(pu + pv )− [c0 (a) + cv (xi )] = 0
Firms do not account for congestion effects ! !
Remark : γ = η (θ) (Hosios condition) not enough for thedecentralized equilibrium to be efficient. But the labour tightness θ isat its efficient level :
(1− γ) (y − z)
r + q + γθm (θ)=
h
m (θ)
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Theoretical Analyses of Active Policies
Theoretical Analysis : Subsidies to low-wage employment,Salanie, 1999
No friction framework.
Three production inputs : capital K , skilled labor LS and unskilledlabor LNS
Y =
(aA
σ−1σ + bL
σ−1σ
NQ
) σσ−1
where A is an aggregate representing skilled labor and capital such as :
A = min (LS , γK )
Hence cA = cS + cKγ at equilibrium. Capital and skilled labor are fully
complementary.
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Theoretical Analyses of Active Policies
Conditional demands of inputs
Firms maximize their profits. Conditional demand of inputs deducefrom the minimization of the cost function :
minA, LNScAA + cNSLNS , s.t. F (A, LNS) ≥ Y
This leads to
A = Y
(a
cA
)σ (aσc1−σ
A + bσc1−σNS
) σ1−σ = LS = γK
LNS = Y
(b
cNS
)σ (aσc1−σ
A + bσc1−σNS
) σ1−σ
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Theoretical Analyses of Active Policies
Economic equilibrium
Under perfect competition, profits are nil. Hence, Y = cAA + cNSLNS .This leads to the inputs price frontier :
aσc1−σA + bσc1−σ
NS = 1
This simplifies the inputs quantities at economic equilibrium :
A = LS = γK = Y
(a
cA
)σ
LNS = Y
(b
cNS
)σ
Non-skilled labor cost depends exogenously on the minimum wage :
cNS = wNS (1 + τNS) = λw (1 + τNS)
Capital cost is supposed to be fixed. Hence, cS = cA − cKγ
Skilled Labor Market clears : LS = LSS
Non-skilled labor market fails : U = LSNS − LNS
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Theoretical Analyses of Active Policies
Model’s resolution
9 unknown values : LS , LNS , K , A, Y , cS , cNS , cK , cA
9 equations
Resolution1 Unskilled Labor Cost cNS fixed by the State through the minimum wage2 cA is deduced from the inputs price frontier.3 Labor market equilibrium gives LS then A and Y .4 No profit condition brings LNS and U.
2 variables to consider :
Net skilled wage : cS = wS (1 + τS)Social contributions : T = TS + TNS − TU , where TS = τSwSLS ,TNS = τNSwNSLNS , and TU = ρwNSU. ρ is the remplacement rate.
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Theoretical Analyses of Active Policies
Calibration
Figures taken for 1996.
13.3 millions of employees in the private sector
16% of unskilled workers
cNS = 141 200 F, cS = 231 900 F.
τNS = 0.64, wNS = 86 300 F, τS = 0.69
ρ = 0.38, ratio of average unemployment benefit on mean unskilledwage
Estimation of capital cost :
cA = cS +cK
γ=
cSLS + cKK
LS=
1− RNS
RScS
where RS , RNS and RK are the shares of skilled labor, unskilled laborand capital in global income.Hence RS + RNS + RK = 1 and RA = RS + RK = RNS
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Theoretical Analyses of Active Policies
RNS = 0.06, share of wages in added value (CN)*share of unskilledwages in wages (DADS)
RS = 0.53, hence cAcS
= 1.76
Crucial parameter : Substitution elasticity σ between Aggregate A andunskilled labor LNS .Estimated on individual firm data : σ = 0.7.The model will also be estimated for σ = 2.5.
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Theoretical Analyses of Active Policies
Effect of a decrease in the taxation of unskilled labor
Direct effect : a decrease of the cost of nonskilled labor.cNS = λw (1 + τNS) :
∂ ln cNS
∂τNS=
1
1 + τNS
Differentiating the price factor frontier leads to :
bσc1−σNS d log cNS + aσc1−σ
A d log cA
= RNSd log cNS + RAd log cA = 0
Hence,
∂ log cA
∂τNS=
∂ log cA
∂ log cNS
∂ log cNS
∂τNS= −RNS
RA
1
1 + τNS=
∂ log cS
∂τNS
An decrease in τNS leads to an increase in the cost of skilled labor,capital cost being fixed.
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Theoretical Analyses of Active Policies
For the skilled labor market to be cleared, total output Y mustincrease to compensate for the increase of skilled labor force :
∂ log Y
∂τNS= σ
∂ log cA
∂τNS= −σ
RNS
RA
1
1 + τNS
We can deduce the effect on unskilled labor LNS
∂ log LNS
∂τNS=
∂ log Y
∂τNS− σ
∂ log cNS
∂τNS
= −σ
(1 +
RNS
RA
)1
1 + τNS= −σ
1
RA
1
1 + τNS
Consequences on social contributions∂TS
∂τNS= − τS
1+τSwNSLNS
∂TNS
∂τNS=
(1− σ
RA
τNS
1+τNS
)wNSLNS
∂TU
∂τNS= ρσ
RA
11+τNS
wNSLNS∂T
∂τNS=
(1
1+τNS− σ
RA
ρ+τNS
1+τNS
)wNSLNS
Laffer effect if σ > 2.4
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Theoretical Analyses of Active Policies
Effect of a 10% decrease of τNS
Substitution Elasticity
σ 0.7 2.5cNS -6.1% -6.1%wS +0.7% +0.7%GDP +0.3% +1.1%Employment (thousands) +100 +390TNS (billions francs) -14 -0TS (billions francs) +8 +8TU (billions francs) -3 -13T (billions francs) -3 +21
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Evaluation of Active Labor Market Policies
Evaluation of Active Labor Market Policies
To assess the impact of active labor market policy, needs to assess theimpact on the agent who benefits and on the collective welfare
In practice, very difficult to assess the impact on the collectivewelfare : requires structural modeling.
To assess the impact on individual agents, Rubin-Roy framework.
Outline of the section :1 The Rubin-Roy model2 Evaluation of French low-wage subsidies
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Evaluation of Active Labor Market Policies
The Rubin-Roy Model
Notion of a potential gain : difference of the level of an indicator inthe presence and in the absence of the policy measure.
Main problem : we do not observe both ! !
Solution : Under some assumptions, available observations of someagents who have not benefitted from the measure can be used tomeasure to infer the behaviour of the agents who have benefitted, ifthey had not.
Formalisation : let tP the period over which the“treatment” is applied.There are two potential responses for the individual i
Y Cit is her outcome should she not be treated.
Y Tit is her outcome should she be treated.
Note that t can only be posterior to the“treatment” time tP .
Pierre Cahuc/Sebastien Roux (ENSAE) Labor Market Policies December 12th 2007 28 / 45
Evaluation of Active Labor Market Policies
Y Tit and Y T
it are potential results, for “to be treated”and“not to betreated”are two mutually exclusive states. It is not possible toobserve for the same individual at the same date both variables.
Let Di be a dummy indicating whether i has benefitted from themeasure at time t. The observed variable Yit = DiY
Tit + (1− Di ) Y C
it .
We are interested in the quantity ∆it = Y Tit − Y C
it , that cannot beobserved, by definition.
The unobserved result is named“counterfactual outcome”. For atreated individual i , it will be Y C
it , and for a non treated individual j ,it will be Y C
jt . This may be seen as a missing data problem.
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Evaluation of Active Labor Market Policies
Contrast Variables and Identifying Hypotheses
Choice of a Contrast Variable : Most often Average treatmenteffect on the treated
E (∆|D = 1) = E(Y T |D = 1
)− E
(Y C |D = 1
)Empirical counterpart of E
(Y T |D = 1
)easy. What about
E(Y C |D = 1
)? Need to make identifying hypothesis.
General principle : specify a“control group” that has not undergonethe treatment and is as nearly identical to the treated group aspossible.Identifying hypothesis : the observed responses of the control grouphave the same distribution of the treated group, would have they notbeen treated.
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Evaluation of Active Labor Market Policies
Indirect Effects : From partial equilibrium to Generalequilibrium
The Rubin-Roy model refers to a partial equilibrium. It can not assess theeffects of the measure on other agents than the treated or theenvironment : Indirect Effects
Displacement or crowding-out effects : the jobs created by a measuredestroy other jobs to which the measure does not apply.
Windfall effects : the impact of a measure differs hardly at all fromwhat would have been the case if it had not been applied.
Substitution effects : the jobs created flow to the beneficiaries of aparticular measure at the expense of those who are not targeted.
Tax effects : the taxes needed to finance a measure affect thedecisions of all agents.
Need of equilibrium models to asses the global impact of such policies.
Pierre Cahuc/Sebastien Roux (ENSAE) Labor Market Policies December 12th 2007 31 / 45
Evaluation of Active Labor Market Policies
Which Data ?
1 Observational data : a selection bias
Usually availability of survey or administrative data that giveinformation on treated and non-treated individuals (and the treatmentdummy).Do not allow to distinguish the specific impact of the measure from theimpact of individual initial differences.The treatment can be chosen by an individual, based on hercharacteristics (unobservable or not).If the choice of the treatment can fully be explained by observedcharacteristics Z , use of the“matching”estimator. It works if Y⊥D|Z ,which means a reason is required that justifies a random sampling at agiven stage.
2 Social Experiments
No selection bias : Data are collected such that individuals arerandomly assigned to the treated group or to the control group,randomization. Average differences reflect only programs effects.Would the effect be similar in the“real”world ?
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Evaluation of Active Labor Market Policies
Before-After Estimator
Compares the average responses of the persons treated before and aftertheir participation to the program.
Let Y TA be the realization of the treatment after (A). Y C
A is notobserved.The gain is defined as E
(Y T
A − Y CA |X ,D = 1
).
With individual data, we observe Y TB , the realization of the outcome
on the treated population before (B) the treatment.Identifying hypothesis : E
(Y C
A − Y CB |X ,D = 1
)= 0,
E�Y T
A − Y CA |X , D = 1
�= E
�Y T
A |X , D = 1�− E
�Y C
A |X , D = 1�
= E�Y T
A |X , D = 1�− E
�Y C
B |X , D = 1�
= E�Y T
A |X , D = 1�− E
�Y T
B |X , D = 1�
∆BA = Y TA − Y T
BIdentifying hypothesis failures :
No influence of unobserved heterogeneity.Global change of economy is not corrected forAshenfelter’s dip : behavioral change just before the treatments applies.Pierre Cahuc/Sebastien Roux (ENSAE) Labor Market Policies December 12th 2007 33 / 45
Evaluation of Active Labor Market Policies
Differences-in-differences estimator
Identifying hypothesis :E
(Y C
A − Y CB |X ,D = 1
)= E
(Y C
A − Y CB |X ,D = 0
)Hence
E�Y T
A − Y CA |X , D = 1
�= E
�Y T
A − Y TB |X , D = 1
�− E
�Y C
A − Y CB |X , D = 1
�
= E�Y T
A − Y TB |X , D = 1
�− E
�Y C
A − Y CB |X , D = 0
�
Estimator : ∆DD =(Y T
A − Y TB
)−
(Y C
A − Y CB
)Advantage : insensitive to changes in the global state of the economy.
But assumes“the common-trend assumption”, i-e trends affectingparticipants and non-participants are identical. Ex : Ashenfelter’s dip,Ok if appears for treated and non-treated, but this is not always thecase...
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Evaluation of Active Labor Market Policies
Cross-section estimator
Identifying hypothesis : E(Y C
A |X ,D = 1)
= E(Y C
A |X ,D = 0)
The estimator simply deduces : ∆CC = Y TA − Y C
A
Does not require“common-trend assumption”, not sensitive toAshenfelter’s dip.
However, not satisfied if the selection of individuals does not respectthe randomization condition. Very few chances to be verified withnon-experimental data.
Very often used in social experiments.
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Evaluation of Active Labor Market Policies
Evaluation of the effects of payroll tax subsidies for lowwage workers
Crepon and Desplatz (Economie et Statistique, 2001)
Active labor policy : aims at decreasing the unemployment ofunskilled workers.
Unskilled workers are defined w.r.to their jobs. Automatic distinctionfor blue-collar workers, reconstructed for white-collar workers.
Some stylized facts :
In 2001, 22% or workers in the Private sector occupy unskilled jobs.60% are occupied by women.30% are part-time jobs.Over-representation of under-30 old workers.
Idea of the payroll tax subsidy : the decrease of the cost at low wagelevel should induce firms to create low-wage jobs, thus hire unskilledworkers, without diminishing the minimum wage.
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Evaluation of Active Labor Market Policies
Relative position of the minimum wage relative to medianwage
50 ,0 0 %
55,00 %
6 0 ,0 0 %
6 5,0 0 %
76 78 8 0 8 2 8 4 8 6 8 8 9 0 9 2 9 4 9 6 9 8
Co ût du SMIC/Coût du salaire méd ian SMIC net/Salaire net méd ian
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Evaluation of Active Labor Market Policies
Payroll tax subsidies from 1993 to 1998
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Evaluation of Active Labor Market Policies
Firms Heterogeneity
Treatment variable : level of subsidy.
Mandatory measure, all firms are“treated”.
But some are“more treated” than others
For instance firms with more low-wage workers have greater subsidies.From wages wi ,j ,94 observed for employee i in the firm j in 1994,reconstruction of the subsidy the firm would have been granted,should the measure had been applied in 1994. Let Tyear the taxscheme applied at year year
ci,j,94 (T94) =�1 + T94
�wi,j,94
��wi,j,94
ci,j,94 (T97) =�1 + T97
�wi,j,94
��wi,j,94
For all firms, ex ante cost reduction writes :
tj =
Pi∈j
��ci,j,94 (T97) − ci,j,94 (T94)��
Pi∈j
ci,j,94 (T94)
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Evaluation of Active Labor Market Policies
Heterogeneity of Cost Reductions between firms
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Evaluation of Active Labor Market Policies
Choice of the contrast variables
Basic framework : ∆yj = g (xj , tj) + uj
Causal effect of the measure applied to a firm j :ej = g (xj , tj)− g (xj , 0)
Effect of a marginal increase of cost reduction :
E1 =∑
j
ω∂g (xj , tj)
∂t
where ωj is the weight of firm j .
Global effect of the measure :
E2 =∑
j
ω (∆yj − g (xj , 0))
Pierre Cahuc/Sebastien Roux (ENSAE) Labor Market Policies December 12th 2007 41 / 45
Evaluation of Active Labor Market Policies
Estimation Method
Rosenbaum Rubin (1983) property : Instead of xj , effects can dependon the score s (xj) (dimensionality reduction).The score (interpreted as the predictive probability to be treated as afunction xj) can be estimated from the regression of h(t) on x whereh(.) is the logistic transformation.R2 around 0.5. It remains enough variability that will be interpretedas a“randomization”.
g (s, t) and ∂g∂t (s, t) are non-parametrically estimated. Projection on
orthonormal polynomials separately defined on t and s.
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Evaluation of Active Labor Market Policies
Data and Variables of interest
Data
DADS(individual wages, employment,...)Fiscal data (added value, capital,..)
Variables :
EmploymentMean labor costShare of unskilled workersCapital intensityAdded Value
Pierre Cahuc/Sebastien Roux (ENSAE) Labor Market Policies December 12th 2007 43 / 45
Evaluation of Active Labor Market Policies
Main Results
Marginal Effect Global EffectVariables Manufacturing Services Manufacturing ServicesEmployment 3,3 5,16 2,62 3,44
( 0,82 ) ( 0,68 ) ( 0,8 ) ( 0,78 )Mean labor cost -4,37 -6,4 -3,1 -4,36
( 0,69 ) ( 0,58 ) ( 0,48 ) ( 0,86 )Share of unskilled 0,71 0,73 0,69 0,69
( 0,49 ) ( 0,34 ) ( 0,3 ) ( 0,34 )Capital intensity -1,58 -2,21 -1,41 -1,61
( 1,08 ) ( 0,97 ) ( 0,66 ) ( 0,84 )Production unit cost -3,29 -5,37 -2,44 -3,48
( 0,63 ) ( 0,51 ) ( 0,43 ) ( 0,7 )Added value 2,61 4,65 1,94 3,19
( 1,01 ) ( 0,81 ) ( 0,63 ) ( 0,74 )
Pierre Cahuc/Sebastien Roux (ENSAE) Labor Market Policies December 12th 2007 44 / 45
Evaluation of Active Labor Market Policies
Summary of the results
Marginal increases give estimates of elasticities.
Applying the estimates of the global effects to the whole populationof firms, relative increase (or non-decrease) of 460 000 jobs in firmswho benefited from the payroll tax subsidies, half of themcorresponding to unskilled jobs.
Some limits :
Very imprecise measure.The estimation holds on a very selected sample of firms (90000).External validity ?Nothing about the effect of financing this measure.
Pierre Cahuc/Sebastien Roux (ENSAE) Labor Market Policies December 12th 2007 45 / 45