Fighting Youth Unemployment:The Effects of Active Labor Market Policies

A substantial number of young unemployed participate in active labor market programs(ALMP) in Germany each year. While the aims of these programs are clear – a fast reintegrationinto employment or enrollment in further education – a comprehensive analysis oftheir effectiveness has yet to be conducted. We fill this gap using administrative data onyouth unemployment entries in 2002 and analyze the short- and long-term impacts for avariety of different programs. With informative data at hand we apply inverse probabilityweighting, thereby accounting for a dynamic treatment assignment and cyclical availability ofprograms. Our results indicate positive long-term employment effects for nearly all measuresaimed at labor market integration. Measures aimed at integrating youths in apprenticeshipsare effective in terms of education participation, but fail to show any impact on employmentoutcomes until the end of our observation period. Public sector job creation is found to beharmful for the medium-term employment prospects and ineffective in the long-run. Ouranalysis further indicates that the targeting of German ALMP systematically ignores loweducatedyouths as neediest of labor market groups. While no employment program shows apositive impact on further education participation for any subgroup, the employment impact ofparticipation is often significantly lower for low-educated youths....