The effectiveness of European active labor market programs

Active Labor Market Programs are widely used in European countries, but despite many econometric evaluation studies analyzing particular programs no conclusive cross-country evidence exists regarding “what program works for what target group under what (economic and institutional) circumstances?”. This paper aims at answering this question using a meta-analysis based on a data set that comprises 137 program evaluations from 19 countries. The empirical results of the meta-analysis are surprisingly clear-cut: Rather than contextual factors such as labor market institutions or the business cycle, it is almost exclusively the program type that seems to matter for program effectiveness. While direct employment programs in the public sector frequently appear detrimental, wage subsidies and “Services and Sanctions” can be effective in increasing participants' employment probability. Training programs – the most commonly used type of active policy – show modestly positive effects.