An evaluation of Active Labor Market Policies in Developing Economies: The Mexican Case

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Cruz Aguayo, Yyannú
Reuter, Peter
Smith, Jeffrey
One of the major problems in developing countries is that of unemployment and underemployment. Thus the use of active labor market policies constitutes a very significant part of the policy debate. This dissertation analyzes the training component of one such policies in Mexico: PROBECAT-SICAT (P/S). First, we provide an overview of some of the institutional elements that are likely to have a bearing in the design, functioning and effects of P/S - in particular those related to the decentralized operation and funding of the program. We find that there is some room for a more explicit definition of the mechanisms that establish the checks and controls to reduce misuse of resources. We suggest the inclusion of indicators of job quality as a concrete objective of the program. In the second part of the dissertation, using semi-parametric techniques, we obtain the average treatment effect of the program on its participants. We use a set of variables that capture characteristics of job formality, and find evidence that male and female trainees do increase their probabilities of employment and of employment with health benefits. In addition, we find that, on average, female trainees tend to find employment in more informal jobs than their male counterparts. The last part of the dissertation consists of an impact evaluation of P/S by training type. We find evidence that participating in mixed training in medium increases the trainees' probability of employment per se and employment with desirable 'formal' characteristics, such as health and housing benefits, a written contract, etc., with respect to any other training type. Secondly, the mixed training in micro and small enterprises is superior to the training for self-employment and in-classroom training. Moreover, we find evidence that female participants increase their chances of obtaining jobs with informal characteristics if they choose to participate in training for self-employment with respect to participation in-classroom training. We conclude that even with institutional shortcomings, the program seems to have positive effects that justify its original creation and permanency.