In direct job‐creation schemes, unemployed individuals at risk of permanent labor market exclusion are offered temporary subsidized employment in public‐ or nonprofit‐sector firms in combination with skills training and sociopedagogical support. The main aim is to stabilize and qualify them for later re‐integration into the regular labor market. Exploiting exogenous regional variation in population‐group–specific program capacities, I find that, on average, such a program eases the transition out of unemployment but has no long‐term effect on regular employment.

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