Do Labor Market Policies Have Displacement Effects? Evidence from a Clustered Randomized Experiment

Abstract

This paper reports the results from a randomized experiment designed to evaluate the direct and indirect (displacement) impacts of job placement assistance on the labor market outcomes of young, educated job seekers in France. We use a two-step design. In the first step, the proportions of job seekers to be assigned to treatment (0%, 25%, 50%, 75% or100%) were randomly drawn for each of the 235 labor markets (e.g. cities) participating in the experiment. Then, in each labor market, eligible job seekers were randomly assigned to the treatment, following this proportion. After eight months, eligible, unemployed youths who were assigned to the program were significantly more likely to have found a stable job than those who were not. But these gains are transitory, and they appear to have come partly at the expense of eligible workers who did not benefit from the program, particularly in labor markets where they compete mainly with other educated workers, and in weak labor markets. Overall, the program seems to have had very little net benefits.Bruno Crépon CREST 15, boulevard Gabriel Peri

Can Wage Subsidies Boost Employment in the Wake of an Economic Crisis? Evidence from Mexico

“…There is evidence that labor market programs can have displacement effects, i.e. the program may shift employment from ineligible to eligible jobs instead of creating more jobs overall (Crépon et al 2013).…”

Vocational Training for Disadvantaged Youth in Colombia: A Long-Term Follow-Up

“…11 Moreover, in areas with a high level of treatment, the competition for jobs can increase, decreasing everyone's arrival rates. Based on Crépon et al (2013), one way to gauge the extent to which this is the case is to use the varying proportion of treated (out of the unemployed population) for each city and occupation. In the presence of negative externalities, an increased proportion of treated individuals should reduce overall formal employment rates.…”

“…3 One concern is that some of the observed effects do not represent an increase in overall economic activity, but could arise from the displacement of other workers who are close substitutes of the trainees. Although evidence in Blundell et al (2004) showed no displacement effects in the United Kingdom, a specially designed randomized experiment evaluating a job placement program in France showed evidence of job displacement (see Crépon et al 2013). If the training does improve human capital, such displacement should only be a concern in the short run; in the longer run the economy should expand in response to increased resources.…”

“… See Blundell et al (2004) andCrépon et al (2013).12 The Colombian household survey is used by the Administrative Department of National Statistics of Colombia, DANE, to obtain Colombia's labor market indicators.…”

Viewpoint: Estimating the causal effects of policies and programs

“…Crépon et al. () represents an apogee of this approach. In their study of a French active labour market program, they randomly assign both eligible individuals within jurisdictions and the fraction of the eligible population treated at the jurisdictional level.…”