Evaluating the effects of labour policies, incentives to firms, and welfare policies: methodological issues and case-studies


Research Project supported by the Italian Ministry of Education and Scientific Research, 2003

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The goals of the research programme are presented with reference to the four broad themes it includes. We do not give details on data issues here, despite their relevance to the development of the specific case studies (see the projects of the six RU for details).


The central issue in programme evaluation – not to say in all observational studies aiming at identifying causal relationships - is how to control for confounding factors. Sticking to the basics, the problem is how to measure the net effect of any policy – namely, the contribution of the policy to the observed change – when the analyst is only allowed to observe the events taking place in the real world. The problem arises because in an observational study – as opposed to what happens in a controlled experiment, which is often unfeasible in the social sciences – the analyst does not control the process determining the assignment of subjects to the ‘treatment’ and to the ‘control’ groups. The analyst only observes the outcome of the process. Then, by looking at the differences between the two groups s/he seeks to sort out the effect of the policy from the differences s/he would have observed even if the policy had not taken place. In a technical wording, the impact is defined as the difference between the factual outcome experienced by the subjects in the treatment group and the counterfactual outcome – namely, what subjects in the treatment group would have experienced had they not taken part into the programme. The operational problem then is how to obtain a good approximation of the counterfactual event, which is not observable by definition.
In general terms, the solution to the problem crucially rests on a careful analysis of the selection process. It takes having a thorough understanding of the institutional and economic reasons who led some subjects to undergo the policy while some others did not. As a result, it turns out feasible (i) to list the individual characteristics with respect to which the two groups – treatments and controls – are likely to differ and (ii) to design the collection of information needed to control for such differences. Summing up, the credibility of any estimate of the impact of a public policy ultimately relies on the analyst’s ability to provide an accurate picture of the selection process (and, of course, on the availability of all the relevant information needed to control for the differences between the two groups). Good data combined with the appropriate econometrics is the line to pursue to obtain credible impact evaluations.
Within the current project special care will be devoted to the use and – when needed – to the development of non parametric methods, namely methods that avoid imposing strong, often unwarranted, restrictions on the functional form of the models specified to represent the phenomena under analysis. Typically, this methods provide robust inferences.
In addition – and as a complement – to impact evaluation, we shall consider its links to the cost-benefit analysis and to the economics of welfare. Impact evaluation studies provide estimates of the short-run effects of a policy disregarding their general equilibrium effects. In between such partial equilibrium analyses and a proper general equilibrium analysis there is room for empirical studies, which the RU in Turin plans to pay some attention to.
Finally, the RU in Siena will develop a small microsimulation model for the Tuscany region, to provide an ‘ex ante’ assessment of the effects of tax and transfer policies.


The active labour market policies the research group will deal with are as follows: (a) vocational training programmes; (b) the ‘Contratti di Formazione-Lavoro’ and the ‘Collaborazioni Coordinate Continuative’ programmes; (c) the Mobility Lists; (d) policies promoting the employability of the elderly; (e) tax credits to firms to promote open-ended hirings.
Being active labour market policies – namely, policies aiming at improving the individuals position in the labour market – not just policies aimed at maintaining the individuals income (although some of them do feature an income maintenance component), the evaluation of their effects will be carried out with reference to the characteristics of the post-programme work history of the individuals. As a consequence, the need clearly emerges for data sources documenting the work history of treatments as well as of controls. Data from both administrative archives and surveys will be exploited.

Research units involved: Padova, Torino, Venezia.


The policies providing incentives to firms the research group will deal with are as follows: (a) programmes providing either financial incentives or tax credit to promote capital and R&D investments; (b) business incentive policies in areas with declining industrial production; (c) a local (Tuscany) program promoting youth entrepreneurship.
According to the goal of the programmes, the evaluation will point to measure their impact on employment, on firms survival, on the nature and quality of investments as well as on firms efficiency.
The data needs are quite diversified here. On the one hand, when it is either the firm survival or the impact on employment to matter, longitudinal micro-data are required which will be recovered from administrative archives and from “ad hoc” surveys. On the other hand, when it is the amount and quality of investments to matter, data will be exploited from a survey run by Mediocredito Centrale.

Research units involved: Piemonte Orientale, Salerno, Siena.


The welfare policies the research group will deal with are as follows: (a) the ‘Reddito Minimo di Inserimento’ demonstration; (b) the impact of unemployment benefits on poverty and on labour market participation; (c) local policies to promote fertility. Besides, the RU in Siena will develop a small microsimulation model for Tuscany, as a pilot-study useful fro assessing the short-run effects of tax and transfer policies on household disposable income.
As for their goals these policies are quite heterogeneous. However, they raise very similar methodological issues once one considers evaluating their impact: to our knowledge, an unsettled issue so far. Some of them (e.g., the local policies to promote fertility) will require a preliminary, careful survey on where and how they have actually been implemented.

Research units involved: Padova, Torino, Siena.


Info: anna.giraldo@unipd.it