Active Labor Market Policies in Europe: Performance and Perspectives

Measures of Active Labor Market Policy--such as training, wage subsidies, public employment measures, and job search assistance--are widely used in European countries to combat unemployment. Little, however, is known about what each country can learn from experiences in other countries. This study provides novel insight on this important policy issue by discussing the role of the European Commission's Employment Strategy. It reviews the experiences made in European states and gives a quantitative assessment of the existing cross-country evidence.

Using an innovative meta-analytical approach, the authors find that rather than contextual factors such as labor market institutions or the business cycle, it is almost exclusively the program type that matters for program effectiveness. While direct employment programs in the public sector appear detrimental, wage subsidies and "Services and Sanctions" can be effective in increasing participants' employment probability.