The impact of active labour market policies on the well-being of the unemployed

Abstract

Asking whether social policies can alter the experience of unemployment, this article systematically evaluates whether participation in active labour market policies (ALMPs) influences the well-being of the unemployed. With consistently high unemployment rates in Organisation for Economic Co-operation and Development (OECD) countries, scholars have started to examine the impact of ALMP schemes on a variety of tangible economic outcomes, but place little focus on their sociological and psychological impacts. Using a novel panel survey, the IZA Evaluation Dataset, I employ a propensity score matching approach combined with difference-in-differences to address selection on both observables and unobservables. Consistent with my theoretical predictions, I find evidence that ALMP programmes that are most like regular employment, namely wage subsidies and subsidized self-employment, have the strongest impact on the well-being of the unemployed. Looking at regional and gender differences indicates interesting effect heterogeneity.