Authors	Hujer, R., Caliendo, M. and Zeiss, C.
Year	2004
Reference	In: Descy, P.; Tessaring, M. (Eds.): Impacts of education and training. Third report on vocational training research in Europe: Background report (CEDEFOP Reference Series 54), Office for Official Publications of the European Communities, Luxembourg, pp. 179-214.
Presentations	CEDEFOP-Conference: Evaluation and Impact of Education and Training - Thessaloniki 2002.
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Abstract	Most evaluation studies of active labour market policies (ALMP) focus on the microeconometric evaluation approach using individual data. However, as the microeconometric approach usually ignores impacts on the non-participants, it should be seen as a first step to a complete evaluation only which has to be followed by an analysis on the macroeconomic level. Our study evaluates the impact of active labour market programmes in Germany on the whole economy. The evaluation focuses on vocational training and additionally evaluates subsidized employment programmes in order to compare them to vocational training. To do so we present briefly the institutional set up of active labour market policies in Germany. Furthermore we conduct a theoretical discussion that enables us to find the relevant channels how ALMP might influence the whole economy. This framework serves as a starting point for the following empirical analysis, where we use regional data of 175 German labour office districts and a dynamic panel data estimator to evaluate the impacts of ALMP in Germany in the time period 1999-2001. The empirical analysis relies on the Beveridge curve relationship explaining the total unemployment as a function of the vacancies and the ALMP activity. With this empirical model we are able to estimate the overall effect of ALMP on the economy. Furthermore we are using a dynamic specification that enables us to control for the highly persistent pattern of the German unemployment rate. Due to the instance that in dynamic panel data models the usual estimation methods are not appropriate, we implement a system GMM estimator that was found to perform well in the case of highly persistent data. Within the system GMM framework we account for the inherent simultaneity problem of ALMP which results from the fact that ALMP should be expected to be determined by a policy reaction function. The problem of simultaneity arises due to the instances that the decision on how many money is spend on ALMP is driven by the economic situation, i.e. ALMP is determined by an policy reaction function. In this case there would be a causality from the dependent variable i.e. unemployment or employment to the ALMP measures which would result in misleading estimates. Our results indicate a different picture between East and West Germany. Whereas in West Germany we find a positive result for vocational training, the results in East Germany do not look favourable. Unfortunately, the results for East Germany should be handled with care since adequate estimators cannot be implemented due to a too small number of regional units. Comparing the vocational training programmes in West Germany with the job creation schemes, we additionally find that vocational training is the more efficient measure in reducing the unemployment problem.