A Stock–Flow Matching Approach to Evaluation of Public Training Programme in a High Unemployment Environment

Abstract

Monthly panel (1998Monthly panel ( -2003 data from regional labour offices in Latvia are used to analyse the matching process in a high unemployment-low labour demand environment and to evaluate the impact of active labour market policy programmes on outflows from unemployment. Results suggest that the hiring process is driven by a stock-flow rather than by a traditional matching function: the stock of unemployed at the beginning of the month and flow of vacancies arriving during the month are the key determinants of outflows from unemployment to employment, whereas stock of vacancies and inflow of unemployed do not play any significant role. We find positive and significant effect of training programmes on outflows from unemployment to employment, thus providing strong evidence against cuts in training expenditures.

(In)Efficiency of matching: the case of a post-transition economy

“…They also incorporate indicators of ALMPs in the matching functions, namely they include the share of job seekers subjected to training programmes and find statistically significant but less than proportional impact. Unfortunately, Dmitrijeva and Hazans (2007) take the share of trained directly in the stochastic frontier estimation instead of the two stage approach, thus risking the endogeneity consequences.…”

“…Namely, Ministry of Finance in January each year divides the Employment Fund financing among NUTS2 level representatives of the public employment services along an algorithm that provides a premium to regions with higher than average unemployment and higher than Consequently, the mechanism of ALMPs financing virtually excludes any possibility of endogeneity due to simultaneity suggested in the literature (cfr. Dmitrijeva and Hazans (2007)). Conversely, this financing suggests a natural experiment to which NUTS4 local labour markets were subjected in terms of ALMPs financing availability.…”

“…Following Lehmann (1995), Dmitrijeva and Hazans (2007) suggest that policy relevant variables (e.g. ALMPs)…”

“…Most recently, Dmitrijeva and Hazans (2007) analyse the Latvian data differentiating between stocks and flows of job seekers and vacancies. They find that dynamics between stocks of unemployed and flows of vacancies fit best the nature of the matching process.…”

“…Therefore, following Greg and Petrongolo (2005) and Dmitrijeva and Hazans (2007) empirical specification 7 Prior to 1999 ALMPs financing was allocated to voivodship level directly by the Ministry of Finance based on an algorithm, which gave preference to regions with relatively more severe labour market outlooks and the needs expressed by the local labour offices at the end of each prior fiscal year. Thus, one could claim that Puhani (1999) results suffer from endogeneity.…”