Do Firms Benefit from Active Labour Market Policies?

This paper investigates the link between variation in the supply of workers who participate in spe­cific types of active labour market policies (ALMPs) and firm performance using a new exception­ally informative German employer-employee data base. For identification we ex­ploit that German local employment agencies (LEAs) have a high degree of autonomy in determining their own mix of ALMPs and that firms' hiring regions overlap only imperfectly with the areas of responsibility of the LEAs. Our results indicate that in general firms do not benefit from ALMPs and in some cases may even be harmed by certain programs, in particular by sub­sidized employment and longer training programs. These findings complement the negative assessment of the cost-effectiveness of ALMPs from the empirical literature on the effects for participants.