A stock-flow matching approach to evaluation of public training programme in a high unemployment environment

Monthly panel (1998-2003) data from regional labour offices in Latvia are used to analyse the matching process in a high unemployment-low labour demand environment and to evaluate the impact of active labour market policy programmes on outflows from unemployment. Results suggest that the hiring process is driven by a stock-flow rather than by a traditional matching function: the stock of unemployed at the beginning of the month and flow of vacancies arriving during the month are the key determinants of outflows from unemployment to employment, whereas stock of vacancies and inflow of unemployed do not play any significant role. We find positive and significant effect of training programmes on outflows from unemployment to employment, thus providing strong evidence against cuts in training expenditures.