In the 1990’s the Federal Employment Service and the Federal Government in Germany spent over 400 billion DM on active labour market policy. Other public bodies also spend significant amounts on active measures. Furthermore, expenditures are high for passive labour market policy, i.e. the unemployment insurance system and early retirement programs. The study evaluates the employment effects of various active labour market policy measures and the unemployment insurance. Besides the employment effects and fiscal costs of reform options for a subsidised low-wage sector in Germany and an early retirement program are discussed. In particular the project has the following objectives:

• We describe criteria as well as theoretical and empirical methods for evaluating labour market policies, including international experiences.
• We explain possibilities and restrictions for evaluation in Germany with respect to the availability of appropriate data.
• Reviewing German and international evaluation studies, we obtain clues for a more effective design of labour market policy.
• We conduct an aggregate impact analysis to estimate the effect of job creation schemes and public training programs on regional unemployment in East and West Germany, taking into account indirect employment effects on non-participants.
• Finally we point out suggestions for the improvement of the design of labour market policy on the one hand, and for scientific evaluation in Germany on the other.

A short version (in German) of the final report can be downloaded at www.zew.de.