Ein-Euro-Jobs und regulaere Beschaeftigung

The most widespread active labour market program in Germany is the so-called ‘One-Euro- Job’. Participants carry out social activities like caring for the elderly, city cleaning or environmental activities. The principal objective is to improve or maintain the employability of hard-to-place unemployed. However, there is a certain risk of within-firm substitution of regular employees by One-Euro-Job participants. The aim of the study is to identify such substitution effects in participating establishments. For this purpose I present some descriptive results from the survey ‘Experience with One-Euro-Jobs’. In a further step I use data from the IAB Establishment Panel 2004 to 2007 to identify substitution effects. To account for selectivity, I apply a difference-in-difference approach and propensity score matching. The empirical results indicate that regular employment relationships are not substituted by One-Euro-Jobs. This holds for West as well as for East Germany. However, the identification of within-firm substitution in the matching procedure requires that the program has no employment effect on the control group. Otherwise, substitution effects cannot be identified. For this reason, I provide evidence for potential displacement effects in the control group using a fixed-effects panel model. The results indicate that the control group is not affected by the program.