The effects of subsidized transit on the unemployed youth: A regression discontinuity design

Abstract

I assess the effects of a simple and low-cost intervention targeted at the youth: subsidized public transport. Using a regression discontinuity (RD) design in the Spanish region of Madrid, I examine the short-term effects of a transit subsidy that reduced job search and commuting costs for unemployed youths under 26. Specifically, I compare the future labor market outcomes of unemployed assistance recipients who were laid off just before and after the age of 26. RD estimates suggest that subsidized transit may bring meaningful employment gains for young assistance recipients. In particular, the results indicate that cheaper transport may not only help them find jobs but also remain employed longer. Finally, I find supporting evidence that these gains are driven by increased geographical mobility among those living farther away from jobs.