Evaluating the Employment Impact of a Mandatory Job Search Program: The New Deal for Young People in the UK

This paper exploits the differential timing of the introduction of a labor market program across areas as well as agerelated eligibility rules to identify the treatment effect of a targeted active labor market program. We are especially concerned about substitution and equilibrium wage effects. The program studied is the “New Deal for the Young Unemployed” in the UK and uses an administrative panel data on individuals between 1982 and 1999. This mandatory program involves extensive job assistance for young unemployed followed by various other options, including wage subsidies. Estimates of the employment effects of the mandatory job search assistance part of the program are presented using a variety of estimation techniques exploring combined "difference in differences” and matching procedures. Based on the pilot study we find that the New Deal program raised employment by a significant about 5 percentage points.

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