Market Tightness Invariance
RCTReview
Field experiments evaluating active labor market policies risk spillover contamination if the intervention significantly shifts the ratio of open job vacancies to job seekers (market tightness), altering control group matching probabilities.
Picture this
Imagine a job fair where event organizers add new job seekers and new employer booths at equal rates. Because the average line length at each booth stays identical, uninvited job seekers standing in line face the exact same odds of getting hired as before the event started.
What the evidence says
Supply-side windfall ($\omega = 0.259$) and demand-side substitution ($\psi = 0.227$) were nearly equal ($\omega - \psi = 0.032$), and program scale relative to the broader labor market was under 10% (9.9% mean ratio), resulting in near-zero market tightness adjustment and validating control group spillover independence.
- Who was studied
- N = 1,842 youth applicants and 731 firms across 7 urban areas in Côte d'Ivoire.
- How
- Matching model estimating market tightness shift $\theta_1 - \theta_0 = (\omega - \psi)\frac{N_{form}}{A_s + A_d}$ under double-sided randomization.
What to do
Structure multi-sided interventions so supply-side participant withdrawals equal demand-side firm replacements to maintain stable market tightness and prevent control group spillover contamination.
From the source
"The order of magnitude of the change in the market tightness is $\sigma(\psi-\omega)$, where $\sigma$ is the size of the experiment... The results confirm this feature of the experiment: the tightness adjustment is very small in practice. Control firms and youths are thus unlikely to be affected by spill-overs due to changes in market conditions."
Direct_and_Indirect_Effects_of_Subsidized_Dual_Apprenticeships.pdf