The efficiency analysis applied for the evaluation of labour market policies: Study case for Romania

The transition to a market economy started in Romania after 1989 and had significant repercussions on labor market outcomes, in terms of both levels and composition. Labor markets adjusted to the new economic environment by reducing employment and labor force participation, and by increasing unemployment to rates unseen in Romania. The Romanian government soon recognized the urgency of developing social safety programs and labour market programs to help the unemployed during this transition period, but only in the late 1990s a coherent and a large scale program was launched. Since there are important financial resources allotted to this type of spending, it is necessary to evaluate the social benefit they bring. Despite the great interest of this topic, both for scientists and for politicians, there are quite a few studies on Romanian labour market policies. One of the reasons is the unavailability of data and the lack of surveys on labour market policies. The purpose of the paper is to evaluate the efficiency of some public policy measures in Romania, in time periods 2004 and 2005, and thus, to contribute to a better knowledge of Romanian labor market. We present the existing labour market policies in Romania and we focus on the most significant ten interventions. The efficiency analysis in performed using data envelopment analysis (DEA method), that has proven useful in a diverse variety of applications. Due to the rather small number of observed units, we use a small number of inputs and outputs. The inputs are the expenditure and the number of participants registered for each measures. As output we use the percentage of exits to employment in the total number of exits. We conduct the analysis for each year and we use Malmquist index numbers for evaluating the changes in efficiency of LMP in 2005 compared to 2004. The results emphasize that in both years the active measures were more efficient than the passive ones and the Completion of employees’ incomes (I11) was on the efficiency frontier, along with Vocational training (I7). Unemployment indemnity (I2), the measure with the highest value of expenditure, was half efficient compared to those situated on efficiency frontier.