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What Do NEETs Need? The Effect of Combining Activation Policies and Cash Transfers

Author

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  • Francesco Filippucci

    (PSE - Paris School of Economics - UP1 - Université Paris 1 Panthéon-Sorbonne - ENS-PSL - École normale supérieure - Paris - PSL - Université Paris Sciences et Lettres - EHESS - École des hautes études en sciences sociales - ENPC - École des Ponts ParisTech - CNRS - Centre National de la Recherche Scientifique - INRAE - Institut National de Recherche pour l’Agriculture, l’Alimentation et l’Environnement, PJSE - Paris Jourdan Sciences Economiques - UP1 - Université Paris 1 Panthéon-Sorbonne - ENS-PSL - École normale supérieure - Paris - PSL - Université Paris Sciences et Lettres - EHESS - École des hautes études en sciences sociales - ENPC - École des Ponts ParisTech - CNRS - Centre National de la Recherche Scientifique - INRAE - Institut National de Recherche pour l’Agriculture, l’Alimentation et l’Environnement)

Abstract
Activation policies and cash transfers are often used jointly, but the literature has only evaluated them one conditional on the other. This paper evaluates an innovative French program that provided a year of cash transfers and intensive activation measures to disadvantaged youth Not in Employment Education or Training (NEETs). I develop a difference-indifference methodology that extends De Chaisemartin and D'Haultfoeuille (2020a) to a setting where individuals enter the population of interest in cohorts. While no significant effect was found when participants are enrolled, after completion of the program compliers reported an increase of 33 percentage points in the probability of employment and of 72 hours worked on a quarterly basis. No effect was detected on wages. I investigate the mechanisms using the timing of activation measures, the phase-out of the cash transfer, and a framework with discrete labor supply and search frictions. I find that the zero effect during enrollment arises from a negative reaction to implicit taxation from transfer phase-out, lock-in from training, and a counterbalancing positive effect of activation. This finding suggests potential complementarities between cash transfers and activation measures. Moreover, it shows that disadvantaged NEETs have low job finding rates at baseline, large elasticity of labor supply, and significant time constraints.

Suggested Citation

  • Francesco Filippucci, 2022. "What Do NEETs Need? The Effect of Combining Activation Policies and Cash Transfers," PSE Working Papers halshs-03524083, HAL.
    • Handle: RePEc:hal:psewpa:halshs-03524083
    Note: View the original document on HAL open archive server: https://shs.hal.science/halshs-03524083
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    References listed on IDEAS

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    Keywords

    Active labor market policies; Cash transfers; NEETs; Job search; Difference-in-difference;
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