On the New Methodology of Cost‐Benefit Analysis of ALMP – The Case of Serbia

Zubović, Jovan and Simeunović, Ivana (2012): On the New Methodology of Cost‐Benefit Analysis of ALMP – The Case of Serbia. Published in: New Challenges in Changing Labour Markets (15 March 2012): pp. 95-111.

Abstract

Active labour market policies are commonly used tool to fight unemployment. In the late 1970s in most developed countries of OECD government expenditures on those policies reached up to 1.5% of GDP. This created a need to evaluate the impact of such measures and perform cost‐benefit analyses. Evaluations have in the previous 30 years been undertaken by using several methods: experimental and quasi‐experimental, measurements and evaluations of processes performance, micro and macro analyses. In this paper we have presented and tested a modified approach of cost‐benefit analysis of ALMP viewed as an investment made by a government. The goal was to determine whether by using such an approach it is possible to provide new information to policy makers and to deepen research and further develop a methodology which will be robust enough to serve as a proof of ALMP effectiveness. Initial results of the empirical research in Serbia show very positive results, indicating that especially in the period of recessions, active measures can significantly improve labour market conditions, thus create high levels of return to investments (taking ALMP as an investment). Using aggregate data on all persons being registered as unemployed at the beginning of 2008 and 2009, we have tested how the ALMP impact the potential growth of tax returns. Our findings say that in 2008 there has been a net gain of € 269 million and in 2009 € 166 million in tax returns collected.

• Item Type: MPRA Paper
• Language: English
• Keywords: Active policies, evaluation, unemployment
• Subjects: E - Macroeconomics and Monetary Economics > E2 - Consumption, Saving, Production, Investment, Labor Markets, and Informal Economy > E24 - Employment ; Unemployment ; Wages ; Intergenerational Income Distribution ; Aggregate Human Capital ; Aggregate Labor Productivity; J - Labor and Demographic Economics > J6 - Mobility, Unemployment, Vacancies, and Immigrant Workers > J68 - Public Policy

References

1. Baily, M., and J. Tobin (1977) Macroeconomic Effects of Selective Public Employment and Wage Subsidies, Brooking Papers on Economic Activity Vol. 1977, No. 2, pp. 511‐544

2. Barkin S (1967) Meeting the demands of an active manpower policy with the assistance of the academic disciplines, De Economist, Vol 115, Issue 6, Springer Netherlands

3. Betcherman, G., Olivas, K., Dar, A. (2004), Impact of Active Labour Market Programs: New Evidence from Evaluations with Particular Attention to Developing and Transition Countries, Social Protection Disscusion Paper Series 0402, the World Bank, januar 2004.

4. Boeri, T., Ours, J. (2008), “Active Labour Market Policies”, in The Economics of Imperfect Labour Markets, Princenton Univeristy Press, http://press.princeton.edu/chapters/s12_8771.pdf

5. Bonin, H., Rinne, U. (2006), Evaluation of the Active Labour Market Program Beautiful Serbia, IZA Discussion Paper 2533

6. Bonoli, G. (2010), The Political Economy of Active Labour Market Policy, Working Papers on the Reconciliation of Work and Welfare in Europe 01, RECWOWE Publication, Dissemination and Dialogue Centre, Edinburgh.

7. Calmfors, L. (1994), Active Labour Market Policy and Unemployment: a Framework for the Analysis of Crucial Design Features, OECD Economic Studies 22, summer 1994.

8. Calmfors, L, Forslund A, Hemstrom M (2002) Does active labour market policy work? Lessons from Sweedish experiences, Sweedish Economic Policy Review 8 (2), pp. 61‐124

9. Dar A, Tzannatos Z (1999) Active labour market programs: A review of the evidence from Evaluations, Working paper, World Bank, (accessed 12.02.2011) http://rru.worldbank.org/documents/toolkits/labour/toolkit/pdf/reference/Dar_Tzannatos_1999_854C0.pdf

10. Daguerre, A., Etherington, D. (2009), Active Labour Market Policies in International Context: What Works Best? Lessons for the UK, Department for Work and Pensions, Working Paper 59.

11. Estevão M (2003) Do Active Labour Market Policies Increase Employment?, International Monetary Fund (IMF) Working Paper 03/234. Washington, DC: IMF. available at: http://www.imf.org/external/pubs/ft/wp/2003/wp03234.pdf (accessed 12.05.2011.)

12. European Commission (2010), Europe 2020: European strategy for smart, sustainable and inclusive growth ‐ http://eunec.vlor.be/detail_bestanden/doc014%20Europe%202020.pdf (accessed 14.01.2011)

13. European Commission (2009), Addendum to the 2006 LMP Methodology, March 2009, Office for Official Publications of the European Communities, Luxembourg. http://epp.eurostat.ec.europa.eu/portal/page/portal/labour_market/documents/Addendum_2006_LMP_EN.pdf (accessed 16.04.2011)

14. European Commission (2008) Statistical classification of economic activities in the European Community, available at: http://epp.eurostat.ec.europa.eu/cache/ITY_OFFPUB/KSRA‐ 07‐015/EN/KS‐RA‐07‐015‐EN.PDF

15. European Commission (2006), Labour Market Policy Database: Methodology, Revision of June 2006, Office for Official Publications of the European Communities, Luxembourg. http://epp.eurostat.ec.europa.eu/cache/ITY_OFFPUB/KS‐BF‐06‐003/EN/KS‐BF‐06‐003‐EN.PDF (accessed 27.01.2011)

16. European Commission (1993), Growth, Competitiveness, and Employment: The Challenges and Ways Forward into the 21st Century, White Paper, Office of Official Publications of the European Commission, Luxembourg. http://www.ena.lu/commission_white_paper_growth_competitiveness_employment_1993‐2‐10799 (accessed 14.05.2011)

17. Eurostat on‐line database: http://epp.eurostat.ec.europa.eu/portal/page/portal/statistics/search_database (accessed 11.05.2011)

18. Eurostat (2011) On‐line database on labour market policies, available at: http://epp.eurostat.ec.europa.eu/portal/page/portal/labour_market/labour_market_policy/database (accessed 12.05.2011)

19. Fay, R. (1996): Enhancing the Effectiveness of Active Labour Market Policies: Evidence from Programme Evaluations in OECD Countries, Labour Market and Social Policy Occasional Papers, OECD.

20. Fields G.S. (2007) Labour Market Policy in Developing Countries: A Selective Review of the Literature and Needs for the Future, Policy Research Working Paper Series, No. 4362. Washington, DC: World Bank.

21. Greenberg DH, Michalopoulos C, Robins PK (2003) A Meta‐Analysis of Government‐Sponzored Training Programs, Industrial and Labour Relations Review 57 (1), pp. 31‐53

22. Harrell, A., Burt, M., Hatry, H., Rossman, S., Roth, J., Sabol, W. (1996). Evaluation strategies for human services programs: A guide for policymakers and providers. Washington, DC: The Urban Institute.

23. Hujer R, Caliendo M, Zeiss Ch, Blien U (2002) Macroeconometric evaluation of active labour market policies in Germany ‐ a dynamic panel approach using regional data, ERSA conference papers ersa02p225, European Regional Science Association

24. de Koning J, Peers Y (2007) Evaluating ALMP evaluations, SEOR Working Paper No. 2007/2, Rotterdam

25. Kahn R.F. (1931) The Relation of Home Investment to Unemployment, Economic Journal, June 1931

26. Keynes J.M. (1936) The General Theory of Employment, Interest and Money Macmillan Cambridge University Press, for Royal Economic Society in 1936; available at: http://www.marxists.org/reference/subject/economics/keynes/generaltheory/index.htm (accessed 12.05.2011.)

27. Kluve J (2010) The effectiveness of Eruopean ALMP, Labour Economics, doi:10.1016/j.labeco.2010.02.004

28. Kuddo, A. (2009), Employment Services and Active Labour Market Programs in Eastern European and Central Asian Countries, Social Protection Disscusion Paper 0918, the World Bank, october 2009.

29. Lehmann, H., Kluve, J. (2010), Assessing Active Labour Market Policies in Transitional Economies in The Labour Market Impact of the EU Enlargement, Caroleo, F.E., Pastore, F. (eds.), Springer‐Verlag Berlin Heidelberg, pp. 275‐307

30. Martin, J.P i Grubb D (2001) What works and for whom: a review of OECD countries’ experience with active labour policies, Swedish Economic Policy Review 8 (2001) 9‐56

31. Martin, J.P. (2000), What Works Among Active Labour Market Policies: Evidence from OECD Countries’ Experiences, OECD Economic Studies 3, OECD Publishing.

32. MERR (2011) National action plan of employment for 2011, Ministry of economy and regional development of Serbia

33. Mosteanu T, Iacob M (2008) Theories And Approaches Regarding The Cost‐Benefit Analysis Role And Principles, Theoretical and Applied Economics, Asociatia Generala a Economistilor din Romania ‐ AGER, Vol. 11 (528 s), pp. 7‐13, November.

34. Nickell S, Nunziata L, Ochel W., Quintini G. (2001) The Beveridge curve, unemployment and wages in the OECD from the 1960s to the 1990s ‐ preliminary version. CEPDP, 502. Centre for Economic Performance, London School of Economics and Political Science, London, UK.

35. OECD (2011) on‐line data base on public expenditure for active labour market policies, available at: http://stats.oecd.org/Index.aspx?DatasetCode=LMPEXP (accessed 22.02.2011)

36. OECD on‐line database on Labour market policies. http://stats.oecd.org/Index.aspx?DatasetCode=LMPEXP

37. OECD (2010), OECD Employment Outlook 2010: Moving Beyond the Jobs Crisis, OECD: Paris.

38. OECD (2008) Serbia: A Labour Market in Transition, OECD: Paris

39. OECD (1993) Active Labour Market Policies: Assessing Macroeconomic and Microeconomic Effects, chapter 2, pp. 39‐79, in Employment Outlook, OECD: Paris.

40. OECD (1990) Labour Market Policies for the 1990s, OECD, Paris.

41. OECD (1964), “Recommendation of the Council on Manpower Policy as a Means for the Promotion of Economic Growth”, OECD, Paris.

42. Ognjenović, K. (2007), The Use of Propensity Score‐Matching Methods in Evaluation of Active Labour Market Programs in Serbia, Economic Annals 52 (172), pp. 21‐53, Faculty of Economics, Belgrade.

43. Robinson, P. (2000), Active Labour‐Market Policies: a Case of Evidence‐Based Policy‐Making?, Oxford Review of Economic Policy 16 (1), pp. 13‐26.

44. Schömann, K. (1995), Active Labour Market Policy, Wissenschaftszentrum, Discussion Paper FS I 95‐201, Berlin. http://bibliothek.wz‐berlin.de/pdf/1995/i95‐201.pdf.

45. Spevacek AM (2009) Effectiveness of Active Labour Market Programs: A review of Programs in CEE and CIS, USAID knowledge service centre

46. Tobin, J., Baily, M.N. (1977) Macroeconomic effects of selective public employment and wage subsidies. Brookings Papers on Economic Activity, No.2

47. World Bank (2006), Republic of Serbia: Assessment of Labour Market, Report No. 36576‐YU, Washington D.C.

48. Zubović J (2010) Razvoj privrede zasnovan na ulaganjima u ljudske resurse i stranim investicijama, Institut ekonomskih nauka, Belgrade, pp. 39‐57

49. Zubović J, Hanić A (2009) Recruitment practices in Serbian Financial Sector ‐ Employee Referrals and Cooperation with Educational Institutions, Internationall Tempus conference Business Opportunities in Serbia: the Case of Italian Business, BBA and IEN, Belgrade, June 2009.

50. Zubović J, Domazet I (2009) Uticaj tranzicije na zaposlenost i zarade u Srbiji ‐ The effects of transition on employment and wages in Serbia, Nacionalna monografija "Efekti tranzicije u Srbiji i suočavanje sa globalnom ekonomskom krizom", Scientific Association of Economists, Belgrade, 2009