Comparative Evaluation of ARGE (Team) vs. Option Model: Two Elements of Integrated Support according to the 4th Law on Modern Services in the Labour Market/ "Hartz IV" (Field 4: Macroanalysis and Regional Comparisons)

Tasks:

The evaluation of the experimentation clause in par. 6c SGB II aims at analysing the different forms of administering benefits for the long-term unemployed (“ALG II” recipients) by a consortium of the local labour office and municipalities (“ARGEn”), an approved municipal authority (“zkT”) or with separate responsibility of the local labour office and the municipality. Specifically, the evaluation will have to show which of these administrative arrangements is best suited to integrate benefit recipients into the labour market, to improve or preserve their employability and to stabilize them socially.

For this purpose the project has been divided into four fields:

• Research on field 1 (“descriptive analysis and matching”) is carried out by the Institute for Applied Economic Research (IAW) in Tübingen and the Center for European Economic Research (ZEW) in Mannheim. The tasks of field 1 comprise a regular data report on aggregate regional statistics, an annual email survey conducted among directors of the ARGEn and zkT with the purpose of characterising the type of their organisation, and the definition of a the sample of regions to be examined in fields 2 and 3 using matched regions.
• The Institute for Urban and Rural Development (ISR) in Frankfurt am Main, the infas Institute for Applied Social Science in Bonn and the Social Science Research Center (WZB) in Berlin are in charge of field 2 ("implementation and governance analysis"). Field 2 will undertake intensive case studies in a sample of 154 regions with the aim of understanding the working process of the different forms of administrating the support for ALG II recipients as well as the local political and business networks they are involved in.
• Field 3 ("analysis of effectiveness and efficiency") is put in the hands of the ZEW, the Institute for Work and Technology in Gelsenkirchen and TNS Emnid in Bielefeld. Field 3 is devoted to evaluating the different administrative arrangements (mainly ARGEn and zkT) regarding the the achievement of the above mentioned aims at the micro-level, i.e., using data for individuals and households.
• The ifo Institute for Economic Research in cooperation with the IAW is in charge of field 4 (macro-analysis and regional comparisons). The research agenda for this field is to evaluate the macroeconomic effects of different strategies employed by the different types of administration. Regional links and interactions will be explicitly taken into account. The macroeconomic analysis aims at measuring not only the direct effects for ALG II recipients (as is done in the microeconomic analysis, field 3) but also the indirect effects affecting those not treated and the economy as a whole. In particular, spillover effects have to be taken care of if a reform affects a large number of individuals.
• The Institute for Social Research and Social Policy (ISG) in Cologne is coordinating the overall project.

A meaningful comparison of the performance of the different forms of administering benefits for the long-term unemployed has to take regional differences in the economic environment into account. In a first step of the evaluation, a regional comparison and benchmarking will therefore be carried out. In a second step, we plan to identify the determinants of the performance in a given region. In a third and final step, we will answer the central research question “what would have happened at an aggregate level, if either the ARGE-type organisation or the zkT organisation had been implemented nationwide?”.

Since a fundamental labour market reform such as Hartz IV, which affected several million individuals, creates not only incentives for each individual to change his or her behaviour, but also leads to changes in the economic conditions, macroeconomic consequences and potential substitution and displacement effects have to be taken into account. Additionally, interactions between regions have to be addressed in the analysis.

Methods:

The choice of an econometric identification strategy to evaluate macroeconomic effects will be co-determined by the availability of data and specific features of the indicators for the different administrative arrangements that can be used for the evaluation. The following strategies are employed to identify causal effects. Due to the relatively small number of regional units (ca. 440) we will abstain from using matching techniques to identify effects of the different administrative arrangements. Instead, we will use an instrumental-variable approach taking care of the potential selection of regional units into one administration type or another. Furthermore, we will take regional interactions between the different regional units into account using up-to-date methods applied in current research. Most importantly, regional interactions have to be modelled explicitly, since the construction of larger regional labour markets would fail to capture the different administrative arrangements effectively used in each region. Data and other sources:

We use all municipal-level statistics available at the Federal Statistical Office and the Federal Labour Agency. In addition, we utilize data on a variety of organisational characteristics of ARGEn and zkT surveyed in field 1 on an annual basis. Furthermore, we plan to include additional information from a further survey which should allow us to identify why a given region has opted for a specific form of administering benefits for the long-term unemployed.