Policy complementarity or substitution? The joint employment effects of active labor market policy and early childhood education and care

Abstract Scholars have long argued that social policies affect people’s employment chances in interconnected ways, where a given policy intervention might have employment effects that are strengthened or dampened by other interventions. This article theorizes and empirically assesses how national active labor market polices (ALMP) and early childhood education and care (ECEC) interact in affecting individuals’ employment chances. The objective is to address scholarly controversy over whether this policy interaction entails complementarity, substitution, or non-interaction. Analyses draw on EU-SILC individual-level true-panel survey data 2005–2019 from twenty-six European countries and aggregate policy indicators. Results show that ALMP and ECEC have complementary positive implications for employment probability among individuals with children, especially women. ALMP effort tends to have a more positive association with employment probability as ECEC effort becomes more substantial, and vice versa. Such patterns remain after controlling for individual characteristics, previous year’s employment status, country fixed effects, and macro-economic conditions.