Social Employment of Welfare Recipients in Belgium: An Evaluation

In Belgium welfare agencies receive a subsidy to employ welfare recipients for a period sufficiently long to entitle them to benefits of the contributory social insurance program This work experience program without any training content is called Social Employment (SE) This paper investigates the effect of SE on the exit rate from welfare We argue that the funding of the program induces exogenous variation in the SE-participation rates between regions We propose a grouping/IV estimator of the SE effect that exploits this variation The estimator is consistent even if the selection into SE depends on the average unobserved characteristics of welfare recipients in a region and with the welfare spell of a specific length The empirical analysis shows that there is creaming in the selaction process Without correction for selectivity we find that SE reduces welfare dependency After correction this conclusion is reversed These results are in line with the diagnosis of the causes of unemployment persistence in Belgium and with the incentives faced by the welfare agencies that administer the program