The employment effect of subsidized transit on unemployment assistance recipients

Abstract

Policymakers typically use active labor market policies, such as training and job-search assistance, to help the unemployed find work. Nonetheless, these are often costly and have shown modest effects. In this research, I assess the employment effect of a low-cost and straightforward intervention: subsidized public transport for cash-constrained jobseekers. In particular, I exploit a natural experiment in Catalonia in 2012 that reduced transit costs for unemployment assistance recipients. 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 brought meaningful employment gains concentrated on younger assistance recipients. These gains ranged from 18% to 25% of their estimated counterfactual outcome, three to twenty-four months after entering unemployment. Finally, I also find suggestive evidence that these employment gains did not come at the expense of lower earnings.