Policy makers view public sector-sponsored employment and training programs and other active labor market policies as tools for integrating the unemployed and economically disadvantaged into the work force. Few public sector programs have received such intensive scrutiny, and been subjected to so many different evaluation strategies. This chapter examines the impacts of active labor market policies, such as job training, job search assistance, and job subsidies, and the methods used to evaluate their effectiveness. Previous evaluations of policies in OECD countries indicate that these programs usually have at best a modest impact on participants’ labor market prospects. But at the same time, they also indicate that there is considerable heterogeneity in the impact of these programs. For some groups, a compelling case can be made that these policies generate high rates of return, while for other groups these policies have had no impact and may have been harmful. Our discussion of the methods used to evaluate these policies has more general interest. We believe that the same issues arise generally in the social sciences and are no easier to address elsewhere. As a result, a major focus of this chapter is on the methodological lessons learned from evaluating these programs. One of the most important of these lessons is that there is no inherent method of choice for conducting program evaluations. The choice between experimental and non-experimental methods or among alternative econometric estimators should be guided by the underlying economic models, the available data, and the questions being addressed. Too much emphasis has been placed on formulating alternative econometric methods for correcting for selection bias and too little given to the quality of the underlying data. Although it is expensive, obtaining better data is the only way to solve the evaluation problem in a convincing way. However, better data are not synonymous with social experiments. © 1999 Elsevier Science B.V. All rights reserved.

The Economics and Econometrics of Active Labor Market Programs

We study a longitudinal sample of over one million French workers from more than five hundred thousand employing firms. We decompose real total annual compensation per worker into components related to observable employee characteristics, personal heterogeneity, firm heterogeneity, and residual variation. Except for the residual, all components may be correlated in an arbitrary fashion. At the level of the individual, we find that person effects, especially those not related to observables like education, are a very important source of wage variation in France. Firm effects, while important, are not as important as person effects. At the level of firms, we find that enterprises that hire high-wage workers are more productive but not more profitable. They are also more capital and high-skilled employee intensive. Enterprises that pay higher wages, controlling for person effects, are more productive and more profitable. They are also more capital intensive but are not more high-skilled labor intensive. We find that person effects explain about 90% of inter-industry wage differentials and about 75% of the firm-size wage effect while firm effects explain relatively little of either differential.

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High Wage Workers and High Wage Firms

Contemporary theories of entrepreneurship generally focus on the recognition of opportunities and the decision to exploit them. Although the entrepreneurship literature treats opportunities as exogenous, the prevailing theory of economic growth suggests they are endogenous. This paper advances the microeconomic foundations of endogenous growth theory by developing a knowledge spillover theory of entrepreneurship. Knowledge created endogenously results in knowledge spillovers, which allow entrepreneurs to identify and exploit opportunities.

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The Knowledge Spillover Theory of Entrepreneurship

This paper offers and tests a theory of training whereby workers do not pay for general training they receive. The crucial ingredient in our model is that the current employer has superior information about the worker's ability relative to other firms. This informational advantage gives the employer an ex post monopsony power over the worker which encourages the firm to provide training. We show that the model can lead to multiple equilibria. In one equilibrium quits are endogenously high, and as a result employers have limited monopsony power and are willing to supply only little training, while in another equilibrium quits are low and training high. We also derive predictions from our model not shared by other explanations of firm sponsored training. Using microdata from Germany, we show that the predictions of the specific human capital model are rejected, while our model receives support from the data.

Why Do Firms Train? Theory and Evidence

In the human capital model with perfect labor markets, firms never invest in general skills and all cost of general training are borne by workers. When lobor market frictions compress the structure...

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The Structure of Wages and Investment in General Training

We study the joint processes of job mobility and wage growth among young men drawn from the Longitudinal Employee-Employer Data. Following individuals at three month intervals from their entry into the labor market, we track career patterns of job changing and the evolution of wages for up to 15 years. Following an initial period of weak attachment to both the labor force and particular employers, careers tend to stabilize in the sense of strong labor force attachment and increasing durability of jobs. During the first 10 years in the labor market, a typical young worker will work for seven employers, which accounts for about two-thirds of the total number of jobs he will hold in his career. The evolution of wages plays a key role in this transition to stable employment: we estimate that wage gains at job changes account for at least a third of early-career wage growth, and that the wage is the key determinant of job changing decisions among young workers. We conclude that the process of job changing for young workers, while apparently haphazard, is a critical component of workers' move toward the stable employment relations that characterize mature careers.

https://papers.ssrn.com/sol3/Delivery.cfm/nber_w2649.pdf?abstractid=439576&mirid=1&type=2

Job Mobility and the Careers of Young Men

Using longitudinal data, we study the processes of job mobility and wage growth among young men. During the first ten years in the labor market, a typical worker will hold seven jobs, about two thirds of his career total. The evolution of wages plays a key role in this transition to stable employment: wage gains at job changes account for at least a third of early-career wage growth, and the wage is the key determinant of job changing decisions among young workers. Job changing is a critical component of workers' movement toward the stable employment relations of mature careers.

/pdf/job-mobility-and-the-careers-of-young-men-4lwjiq6pol.pdf

We study the joint processes of job mobility and wage growth among young men drawn from the Longitudinal Employee-Employer Data Following individuals at three month intervals from their entry into the labor market, we track career patterns of job changing and the evolution of wages for up to 15 years Following an initial period of weak attachment to both the labor force and particular employers, careers tend to stabilize in the sense of strong labor force attachment and increasing durability of jobs During the first 10 years in the labor market, a typical young worker will work for seven employers, which accounts for about two-thirds of the total number of jobs he will hold in his career The evolution of wages plays a key role in this transition to stable employment: we estimate that wage gains at job changes account for at least a third of early-career wage growth, and that the wage is the key determinant of job changing decisions among young workers We conclude that the process of job changing for young workers, while apparently haphazard, is a critical component of workers' move toward the stable employment relations that characterize mature careers

Michael P. Ward

Papers

Job Mobility and the Careers of Young Men

Job Mobility and the Careers of Young Men

Job Mobility and the Careers of Young Men