Active Labour Market Programmes and Unemployment in a Dual Labour Market
AbstractThe paper presents a theoretical analysis of the macroeconomic effects of active labour market programmes in a dual labour-market framework. The paper uses the Shapiro-Stiglitz efficiency-wage model. Active labour market programmes train unskilled labour and transfer them from a high-unemployment to a low-unemployment sector. Programmes have a direct labour-transfer effect which tends to reduce total unemployment. They also have effects on wages via expectations. The later effects were to a very large extent neglected in earlier discussions of active labour-market policy. The model formally identifies and defines the effects on wages via expectations. The net sign of the latter effects depend on how programmes are targeted. In general, the net effect on unemployment is ambiguous. The model explains the conditions under which active labour market programmes reduce aggregate unemployment.
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Bibliographic InfoPaper provided by Stockholm University, Department of Economics in its series Research Papers in Economics with number 1998:2.
Length: 35 pages
Date of creation: Sep 1998
Date of revision:
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Postal: Department of Economics, Stockholm, S-106 91 Stockholm, Sweden
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Active labour market programme; unemployment; dual labor market; efficiency wage;
Find related papers by JEL classification:
- J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials
- J41 - Labor and Demographic Economics - - Particular Labor Markets - - - Labor Contracts
- J64 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Unemployment: Models, Duration, Incidence, and Job Search
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