Can public works programs mitigate the impact of crises in Europe? The case of Latvia

Abstract

To mitigate the impact of the 2008–2010 global financial crisis on vulnerable households, the Government of Latvia established Workplaces with Stipends, an emergency public works program that targeted registered unemployed people who were not receiving unemployment benefits. This paper evaluates the targeting performance and welfare impacts of the program. The paper employs a quasi-experimental estimation strategy and analyzes a unique household survey. The authors find that the Latvian public works program was successful at targeting poor people, and leakage of benefits to non-poor households was small. Using propensity score matching, the authors find that the program’s stipend mitigated the impact of job loss and raised participating household incomes by 37 percent relative to similar households not benefiting from the program. The paper also finds that the forgone income for this program was less than forgone incomes estimated in other countries. JEL codes: I38, J64, J68