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Evaluating the Dynamic Effects of Active Labour Policies in Italy

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  • Carlo Altavilla
  • Floro Ernesto Caroleo

Abstract

This paper analyses whether active labour market programmes (ALMP) 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 ALMP 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 synthesised 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 ALMP and that, especially in the northern regions, atypical contracts shocks account for a substantial portion of unemployment dynamics.

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Bibliographic Info

Paper provided by D.E.S. (Department of Economic Studies), University of Naples "Parthenope", Italy in its series Discussion Papers with number 8_2006.

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Date of creation: 15 Apr 2006
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Handle: RePEc:prt:dpaper:8_2006

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Keywords: ALMP; GMM; P-VAR;

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References

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  1. Reinhard Hujer & Uwe Blien & Marco Caliendo & Christopher Zeiss, 2006. "Macroeconometric Evaluation of Active Labour Market Policies in Germany. A Dynamic Panel Approach Using Regional Data," AIEL Series in Labour Economics, in: Floro Ernesto Caroleo & Sergio Destefanis (ed.), The European Labour Market. Regional Dimensions, edition 1, chapter 14, pages 287-309 AIEL - Associazione Italiana Economisti del Lavoro.
  2. repec:fth:iniesr:429 is not listed on IDEAS
  3. Arellano, Manuel & Bond, Stephen, 1991. "Some Tests of Specification for Panel Data: Monte Carlo Evidence and an Application to Employment Equations," Review of Economic Studies, Wiley Blackwell, vol. 58(2), pages 277-97, April.
  4. 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.
  5. Blundell, Richard & Bond, Stephen, 1998. "Initial conditions and moment restrictions in dynamic panel data models," Journal of Econometrics, Elsevier, vol. 87(1), pages 115-143, August.
  6. Pesaran, M. Hashem & Smith, Ron, 1995. "Estimating long-run relationships from dynamic heterogeneous panels," Journal of Econometrics, Elsevier, vol. 68(1), pages 79-113, July.
  7. Calmfors, Lars & Lang, Harald, 1995. "Macroeconomic Effects of Active Labour Market Programmes in a Union Wage-Setting Model," Economic Journal, Royal Economic Society, vol. 105(430), pages 601-19, May.
  8. Floro Ernesto Caroleo & Francesco Pastore, 2004. "La disoccupazione giovanile in Italia. La riforma dei sistemi d'istruzione e di formazione professionale come alternativa alla flessibilità numerica per accrescere l'occupabilità," CELPE Discussion Papers 83, CELPE - Centre of Labour Economics and Economic Policy, University of Salerno, Italy.
  9. 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.
  10. Richard Jackman & Christopher A. Pissarides & S Savouri, 1990. "Labour Market Policies and Unemployment in the OECD," CEP Discussion Papers dp0011, Centre for Economic Performance, LSE.
  11. Olivier Blanchard & Justin Wolfers, 1999. "The Role of Shocks and Institutions in the Rise of European Unemployment: The Aggregate Evidence," NBER Working Papers 7282, National Bureau of Economic Research, Inc.
  12. Calmfors, Lars & Skedinger, Per, 1995. "Does Active Labour-Market Policy Increase Employment? Theoretical Considerations and Some Empirical Evidence from Sweden," Oxford Review of Economic Policy, Oxford University Press, vol. 11(1), pages 91-109, Spring.
  13. Richard Layard & Stephen Nickell, 1998. "Labour Market Institutions and Economic Performance," CEP Discussion Papers dp0407, Centre for Economic Performance, LSE.
  14. McCall, John J, 1970. "Economics of Information and Job Search," The Quarterly Journal of Economics, MIT Press, vol. 84(1), pages 113-26, February.
  15. Robert G. Fay, 1996. "Enhancing the Effectiveness of Active Labour Market Policies: Evidence from Programme Evaluations in OECD Countries," OECD Labour Market and Social Policy Occasional Papers 18, OECD Publishing.
  16. 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.
  17. 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.
  18. Rettore Enrico & Trivellato Ugo & Martini Alberto, 2003. "La valutazione delle politiche del lavoro in presenza di selezione: migliorare la teoria, i metodi o i dati?," Politica economica, Società editrice il Mulino, issue 3, pages 301-342.
  19. 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).
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Cited by:
  1. Altavilla, Carlo & Caroleo, Floro Ernesto, 2009. "Unintended Effects of National-based Active Labour Market Policies," IZA Discussion Papers 4045, Institute for the Study of Labor (IZA).
  2. Marianna Belloc & Riccardo Tilli, 2013. "Unemployment by gender and gender catching-up: Empirical evidence from the Italian regions," Papers in Regional Science, Wiley Blackwell, vol. 92(3), pages 481-494, 08.
  3. Carlo Altavilla & Floro Ernesto Caroleo, 2013. "Asymmetric Effects of National-based Active Labour Market Policies," Regional Studies, Taylor & Francis Journals, vol. 47(9), pages 1482-1506, October.

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