The employment effect of public transport subsidies on the long-term unemployed
I exploit a natural experiment in Catalonia in 2012 aimed to reduce job-search costs for the long-term unemployed. Most developed countries use traditional active labor market policies, e.g., training and job-search assistance, to help the unemployed find work. Nonetheless, these have shown, on average, limited effects and tend to be costly. Moreover, some countries —particularly Southern Europe— have long struggled to implement these labor market policies. I thus evaluate a low-cost and straightforward policy (subsidized public transport for the unemployed) to help policymakers better choose the optimal policy mix for their own countries, especially those under tight resource constraints.
Using three complementary empirical approaches (difference-in-differences, the synthetic control method, and the synthetic difference-in-differences method), I find that the transport subsidy offered in Catalonia was ineffective in boosting overall job finding or employment stability well into 2017. Nonetheless, I find some evidence that the subsidy increased employment stability for young jobseekers, who usually rely more heavily on public transport.