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(In)Efficiency of matching: the case of a post-transition economy

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Abstract

The aim of this paper is twofold. First, we provide estimates of the evolution in matching efficiencies in Poland, demonstrating decrease in estimated efficiency scores. These trends are accompanied by decreasing outputs in the matching function, as well as the lowering of the elasticities. Second, we relate the estimated efficiency scores to the use of active labour market measures. We find that job brokering intensity is conducive to matching efficiency, but active labour market policies coverage in general is not.

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Notes

  1. See also: Calmfors and Skedinger (1995) and Calmfors et al. (2002).

  2. In the Eurostat nomenclature this is LAU1 or, previously, NUTS 4 level data.

  3. Unemployed are allowed to participate in activisation programmes basing on some explicit or implicit criteria. Consequently, their ability to find employment is already partly incorporated in the decision to allow participation. Case workers may either facilitate the chances of “better” job seekers or ameliorate the difficulties of “worse” ones. In either case, individual search effectiveness varied already before the intervention, which implies that without controlling for the actual ex ante motivation of the job seekers, estimators of the programme ex post effects are biased. This problem can only be solved using individual data and the adequate matching of the participants with non-participants prior to treatment.

  4. Participants may have systematically different chances on the labour market when compared to the non-participants (higher or lower—depending on whether case workers apply positive or negative selection criteria). Consequently, the eventual differences in the matching performance for participants and non-participants are not necessarily an effect of ALMPs, but essentially a measure of the statistical consistency of applying the screening criteria.

  5. It should also be noted that whether ALMPs determine the technical efficiency scores or the matching process could be tested by comparing the goodness of fit of the two alternatives. However, it is likely that introducing ALMPs measures to the matching equation directly induces inconsistency and inefficiency, depending on the nature of the ALMPs-matching link.

  6. The principal studies in this area are carefully surveyed in Munich et al. (1997).

  7. ALMPs instruments are highly regulated in Poland. They comprise subsidised employment (public work schemes—despite their low efficiency, strongly preferred by local authorities—and public service employment), scholarships for youth, on-the-job training as well as specific and general training (including the ability to navigate on the labour market). Finally, there are also instruments supporting self-employment (micro-enterprise development) and subsidies for creating a new position. In addition, there are some specific incentives for fostering employment among handicapped, among whom only 12 % is active on the labour market.

  8. Topping the benefits makes it 0.8 % of GDP). Poland is the only country in the EU with no budgetary contribution to ALMPs.

  9. Incidentally, despite putting NUTS2 level characteristics directly in the financing algorithm mechanism, the unemployment rate differentials are relatively small on NUTS2 level in Poland (approximately 1:1.5). County level regional differentials amount to as much as 1:26, cfr. Tyrowicz and Wojcik (2009).

  10. Over the analysed period there has been some differentiation in the way passive labour market policies were implemented. Namely, in the NUTS2 regions with higher unemployment, the period of benefit eligibility was somewhat longer, potentially affecting the search intensity in these regions.

  11. For the first 2 years of our data, observations for the large cities are not available. Large cities reported the unemployment and vacancies together with their metropolitan areas. As of 2001 large cities report separately and metropolitan areas separately, but data consistency for the period of 1999–2001 could only be maintained for the surrounding metropolitan areas only.

  12. Ibourk et al. (2004) argue that if M i,t does not include the number of job seekers de-listed from unemployment registers due to activisation (e.g. inflows into training programmes), one can formulate a model in which these workers have below average search intensities, i.e., an increase in the size of special training programmes mechanically increases the average observed matching efficiency. Unfortunately, throughout the 2000–2008 period, for which detailed regional data is available, there have been continuous changes of the reporting standards with job seekers in activisation programmes and programmes themselves were defined differently across years.

  13. After the administrative reform of 1999 only few cities were separate administrative units in MPiPS01 and 02 monthly reports. Effectively as of January 2002 metropolitan areas may be followed directly in our data.

  14. Details available upon request, the procedure is a work-in-progress at the current stage. For balanced panels the new algorithm reports results identical to FRONTIER output. For the unbalanced panels, there is no benchmark to test the reliability of the obtained coefficients. Monte-Carlo simulations with Data Generating Processes report accuracy in general case. However, at a current stage, if true parameters are close to some critical values (e.g. elasticity close to 1), the algorithm experiences difficulties in providing adequate standard errors.

  15. We have tested for various interactions and additional cross-terms, but this conclusion stays robust. Detailed results available upon request.

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Acknowledgments

We are extremely grateful to Jan Svejnar, as well as participants of AIEL 2010, EALE 2010 and EACES 2010 conferences as well as seminars at the University of Warsaw, Institute for Social Studies in Rotterdam and National Bank of Poland for valuable comments. Last but not least, two anonymous referees provided constructive remarks, for which we are grateful. Part of the research has been performed while Joanna Tyrowicz has been a visiting researcher at IZA, Bonn and Columbia University, New York whose support is gratefully acknowledged.

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Tyrowicz, J., Jeruzalski, T. (In)Efficiency of matching: the case of a post-transition economy. Econ Change Restruct 46, 255–275 (2013). https://doi.org/10.1007/s10644-012-9127-2

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