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Evaluating the Dynamic Effects of Active Labour Policies in Italy

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Author Info
Carlo Altavilla
Floro E. Caroleo

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Abstract

This paper analyses whether active labour market policies (ALMPs) have differing effects on unemployment and employment dynamics according to the particular region in which they are implemented. To this end, it analyses alternative theoretical and econometric models thought to capture the possible effects of active labour market policies on labour force dynamics. The econometric methodologies implemented are the generalized method of moment (GMM) and the panel vector autoregression (P-VAR). The evidence yielded by the GMM models suggests that the effects of different ALMPs on unemployment are dissimilar across the Italian regions. It follows that some active programmes are likely to have a greater effect in the South than in the North. The results of the P-VAR models estimated are synthesized by impulse response analysis and forecast error variance decomposition. The impulse response analysis suggests that an increase in total ALMP gives rise to: (i) a decrease in the unemployment rate; and (ii) a significant increase in labour force participation. More interestingly, the results obtained from the error variance decomposition analysis show that unemployment movements are not driven by shocks in the ALMPs and that, especially in the northern regions, atypical contracts shocks account for a substantial portion of unemployment dynamics. Copyright 2006 The Authors; Journal compilation 2006 CEIS, Fondazione Giacomo Brodolini and Blackwell Publishing Ltd..

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File URL: http://www.blackwell-synergy.com/doi/abs/10.1111/j.1467-9914.2006.00340.x
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Publisher Info
Article provided by CEIS, Fondazione Giacomo Brodolini and Blackwell Publishing Ltd in its journal LABOUR.

Volume (Year): 20 (2006)
Issue (Month): 2 (06)
Pages: 349-382
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Handle: RePEc:bla:labour:v:20:y:2006:i:2:p:349-382

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  8. Nickell, S. & Layard, R., 1997. "Labour Market Institutions and Economic Performance," Papers 23, Centre for Economic Performance & Institute of Economics.
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  10. Hujer, Reinhard & Caliendo, Marco, 2000. "Evaluation of Active Labour Market Policy: Methodological Concepts and Empirical Estimates," IZA Discussion Papers 236, Institute for the Study of Labor (IZA). [Downloadable!]
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  13. Calmfors, L. & Skedinger, P., 1995. "Does Active Labour Market Policy Increase Employment? Theoretical Considerations and Some Empirical Evidence from Sweden," Research Institute of Industrial Economics Working Papers 429, Research Institute of Industrial Economics (IFN).
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  14. Mortensen, Dale T, 1970. "Job Search, the Duration of Unemployment, and the Phillips Curve," American Economic Review, American Economic Association, vol. 60(5), pages 847-62, December. [Downloadable!] (restricted)
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