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Do Active Labor Market Policies Increase Employment?

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Author Info

  • Marcello M. Estevão

Abstract

Using panel data for 15 industrial countries, active labor market policies (ALMPs) are shown to have raised employment rates in the business sector in the 1990s, after controlling for many institutions, country-specific effects, and economic variables. Among such policies, direct subsidies to job creation were the most effective. ALMPs also affected employment rates by reducing real wages below levels allowed by technological growth, changes in the unemployment rate, and institutional and other economic factors. However, part of this wage moderation may be linked to a composition effect because policies were targeted to low-paid individuals. Whether ALMPs are cost-effective from a budgetary perspective remains to be determined, but they are certainly not substitutes for comprehensive institutional reforms.

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Bibliographic Info

Paper provided by International Monetary Fund in its series IMF Working Papers with number 03/234.

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Length: 50
Date of creation: 01 Dec 2003
Date of revision:
Handle: RePEc:imf:imfwpa:03/234

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Related research

Keywords: Unemployment; Consumption;

References

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  1. Calmfors, Lars & Skedinger, Per, 1995. "Does Active Labor Market Policy Increase Employment? Theoretical Considerations and Some Empirical Evidence from Sweden," Working Paper Series 429, Research Institute of Industrial Economics.
  2. Calmfors, Lars & Forslund, Anders & Hemström, Maria, 2002. "Does active labour market policy work? Lessons from the Swedish experiences," Working Paper Series 2002:4, IFAU - Institute for Evaluation of Labour Market and Education Policy.
  3. Nickell, S. & Layard, R., 1997. "Labour Market Institutions and Economic Performance," Papers 23, Centre for Economic Performance & Institute of Economics.
  4. Martin, John P. & Grubb, David, 2001. "What works and for whom: a review of OECD countries' experiences with active labour market policies," Working Paper Series 2001:14, IFAU - Institute for Evaluation of Labour Market and Education Policy.
  5. John P Martin, 1998. "What Works Among Active Labour Market Policies: Evidence from OECD Countries' Experiences," RBA Annual Conference Volume, in: Guy Debelle & Jeff Borland (ed.), Unemployment and the Australian Labour Market Reserve Bank of Australia.
  6. Layard, Richard & Nickell, Stephen & Jackman, Richard, 1991. "Unemployment: Macroeconomic Performance and the Labour Market," OUP Catalogue, Oxford University Press, number 9780198284345.
  7. Heckman, James J. & Lalonde, Robert J. & Smith, Jeffrey A., 1999. "The economics and econometrics of active labor market programs," Handbook of Labor Economics, in: O. Ashenfelter & D. Card (ed.), Handbook of Labor Economics, edition 1, volume 3, chapter 31, pages 1865-2097 Elsevier.
  8. David Card, 1995. "The Wage Curve: A Review," Working Papers 722, Princeton University, Department of Economics, Industrial Relations Section..
  9. repec:fth:prinin:343 is not listed on IDEAS
  10. Stephen Nickell, 1997. "Unemployment and Labor Market Rigidities: Europe versus North America," Journal of Economic Perspectives, American Economic Association, vol. 11(3), pages 55-74, Summer.
  11. Marcello M. Estevão & Nigar Nargis, 2002. "Wage Moderation in France," IMF Working Papers 02/151, International Monetary Fund.
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Citations

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Cited by:
  1. Marcello M. Estevão, 2005. "Product Market Regulation and the Benefits of Wage Moderation," IMF Working Papers 05/191, International Monetary Fund.
  2. David C Maré, 2005. "Indirect Effects of Active Labour Market Policies," HEW 0509004, EconWPA.
  3. Tvrdon, Michal, 2007. "Labour Market Flexibility: the Case of Visegrad Countries," MPRA Paper 12314, University Library of Munich, Germany.
  4. Bukowski, Maciej & Lewandowski, Piotr & Koloch, Grzegorz & Baranowska, Anna & Magda, Iga & Szydlowski, Arkadiusz & Bober, Magda & Bieliński, Jacek & Zawistowski, Julian & Sarzalska, Malgorzata, 2008. "Employment in Poland 2007: Security on flexible labour market," MPRA Paper 14284, University Library of Munich, Germany.
  5. Estevão, Marcello & Nargis, Nigar, 2005. "Structural Labor Market Changes in France," IZA Discussion Papers 1621, Institute for the Study of Labor (IZA).
  6. Marcello M. Estevão, 2004. "Why is Productivity Growth in the Euro Area So Sluggish?," IMF Working Papers 04/200, International Monetary Fund.

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