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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. Hujer, Reinhard & Caliendo, Marco & Zeiss, Christopher & Blien, Uwe, 2002. "Macroeconometric evaluation of active labour market policies in Germany - a dynamic panel approach using regional data," ERSA conference papers ersa02p225, European Regional Science Association.
  2. McCall, John J, 1970. "Economics of Information and Job Search," The Quarterly Journal of Economics, MIT Press, vol. 84(1), pages 113-26, February.
  3. 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.
  4. Nickell, S. & Layard, R., 1997. "Labour Market Institutions and Economic Performance," Papers 23, Centre for Economic Performance & Institute of Economics.
  5. 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.
  6. 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).
  7. 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.
  8. repec:fth:iniesr:429 is not listed on IDEAS
  9. R Blundell & Steven Bond, . "Initial conditions and moment restrictions in dynamic panel data model," Economics Papers W14&104., Economics Group, Nuffield College, University of Oxford.
  10. 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.
  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. 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.
  13. 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.
  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.
  15. 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.
  16. 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.
  17. 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.
  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. 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.
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Citations

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Cited by:
  1. Carlo Altavilla & Floro Ernesto Caroleo, 2011. "Asymmetric Effects of National-based Active Labour Market Policies," CSEF Working Papers 293, Centre for Studies in Economics and Finance (CSEF), University of Naples, Italy.
  2. 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).
  3. 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.

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