Do Labor Market Policies have Displacement Effects? Evidence from a Clustered Randomized Experiment *

TLDR

The study evaluates the direct and indirect displacement effects of job placement assistance on young, educated job seekers in France through a randomized experiment. The experiment used a two‑step design, first randomly assigning treatment proportions to 235 labor markets, then randomly assigning eligible job seekers within each market to treatment or control. After eight months, participants were more likely to secure stable jobs, but the gains were temporary and partly offset by losses among non‑benefiting workers, resulting in negligible net benefits overall.

Abstract

Abstract This article reports the results from a randomized experiment designed to evaluate the direct and indirect (displacement) impacts of job placement assistance on the labor market outcomes of young, educated job seekers in France. We use a two-step design. In the first step, the proportions of job seekers to be assigned to treatment (0%, 25%, 50%, 75%, or 100%) were randomly drawn for each of the 235 labor markets (e.g., cities) participating in the experiment. Then, in each labor market, eligible job seekers were randomly assigned to the treatment, following this proportion. After eight months, eligible, unemployed youths who were assigned to the program were significantly more likely to have found a stable job than those who were not. But these gains are transitory, and they appear to have come partly at the expense of eligible workers who did not benefit from the program, particularly in labor markets where they compete mainly with other educated workers, and in weak labor markets. Overall, the program seems to have had very little net benefits.