Evaluating the effect of participation in subsidised employment

Youth unemployment has been a persistent problem in the European Union for many years and the affected countries spend a substantial part of their budget on active labour market policies, with the aim to integrate young unemployed workers into the labour market. Employment subsidy programmes are one type of active labour market policies that have been implemented. Although important amounts of money have been spent for these programmes, little is known about the effects of participation in subsidised employment on the labour market transitions. This thesis incorporates several studies that aim to estimate the effect of a subsidised employment programme. The programme provides a reduction of the social insurance contribution for employers that hire eligible workers. All three studies provide estimates for the participation of long term unemployed school leavers. In order to evaluate whether programme participation is useful for their integration into the labour market, the effect on different duration outcomes has been investigated. A major difficulty in causal analysis with non-experimental data is that the characteristics of the group of participants may by systematically different from those of the group of non-participants. Estimates may therefore reflect both the effect of participation as well as the particular selection of participants. To control for this selection bias, multivariate mixed proportional hazard models have been applied and a large number of control variables have been incorporated. The results of this thesis show that participation in the employment subsidy programme accelerates the transitions into regular, non-subsidised employment. Moreover, the employment duration is increased, compared to a regular employment spell. Finally, the estimates show that the effect of a former participation on the duration of a subsequent unemployment spell is similar to the effect of a former regular employment spell.