Economic evaluation of active labour market policy in New Zealand 1989 to 1997

Abstract

Active labour market programmes are an important component of government labour market policy internationally and in New Zealand. The growth in unemployment, and in particular male and long term unemployment, since the mid 1980's in New Zealand have contributed to the enhanced role of active labour market programmes in government policy. In the early 1990's the New Zealand government introduced a menu of interventions including subsidy, work experience and training programmes. Concomitant with this development has been increased pressure from political, business and social groups to assess the effectiveness of this approach in lowering unemployment. The aim of this thesis is to evaluate the effect of active labour market policy utilised in New Zealand from 1989 to 1997. Whether or not these active labour market interventions were beneficial to those males who participated in them, the effect of treatment upon the treated, is the parameter estimated. The range of programmes makes it possible to analyse a number of programme evaluation issues. These include the overall question of the impact of subsidy, work experience and training programmes in general, but also other specific research questions. In particular the range of subsidy programmes makes it possible to identify that subsidies to private sector firms are more effective than those to public sector organisations. The effectiveness of start-up subsidies for the unemployed are also evaluated and found to be beneficial. The effects of participation upon selected education and ethnic groups are also estimated. Since there is no one estimation approach that works in all circumstances, both regression and matching estimators are used. In order to achieve this it is necessary to create two estimation datasets as the data requirements vary for each technique. The main findings from the research are that participation in active labour market programmes is beneficial in reducing the length of time that participants are registered as unemployed. Work experience programmes have the largest impact, followed by subsidies. The effect of training programmes is smallest. The major beneficial effect occurs in the year following participation and then reduces in subsequent years. There are also some important methodological findings, including the sensitivity of results to the time frame, to the datasets chosen, and to the estimation techniques used.