Effectiveness of major activation programs for welfare recipients: Evidence from Germany

The German government introduced in 2005 a fundamental labor market reform, which emphasizes the activation of unemployed welfare recipients. A variety of active labor market policies (ALMPs) should help the unemployed find a job or increase their employability. One important activation program is the comparably short and inexpensive short-term training. This dissertation consists of four articles and investigates the individual employment effects of short-term training for German welfare recipients directly after the introduction of the basic income support for jobseekers in spring 2005. In addition, it shows which firms apply short-term training or one-euro-jobs in order to give further explanations for the differing effects of both schemes in recent micro-evaluation studies. The analyses are based on administrative and establishment panel data. Methods imply uni- and bivariate probit models and statistical matching.The dissertation analyzes the program effectiveness in terms of participants’ labor market outcomes and emphasizes the issue of effect heterogeneity. The articles consider the effects for different groups of participants, different program types and designs. The fourth article takes a different point of view than the other chapters and studies the determinants of firms applying short in-firm training as opposed to one-euro-jobs.The results suggest that classroom training in general has small positive effects on the regular employment probability of participants. Moreover, we find that the program tends to be less effective for young unemployed persons under 25 years, and more effective for long-term unemployed persons. Concerning program heterogeneity, in-firm training shows higher effects than classroom training; classroom skill training is more effective than other classroom training types. Application training is rather ineffective, either carried out as a course or as short individual counseling. The fourth article focuses on the firm side and shows that predominantly firms with good economic prospects apply in-firm training, suggesting the firms’ potential and intention to hire participants afterwards on a regular basis. The characteristics of firms offering one-euro-jobs indicate that these firms do not intend to hire participants after participation.