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Costing the Job Compact

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  • Piggott, John
  • Chapman, Bruce

Abstract

The budgetary cost of any government program should be measured by its impact on the public sector budget balance, over its effective time frame. Typically, official cost estimates focus on the value of outlays only, and thus create a misleading impression of the opportunity cost of some policy initiatives. This paper offers estimates of the budgetary cost of the Job Compact, using a simple labour force transition flows model of unemployment. Deadweight, displacement and effectiveness impacts are explicitly addressed. We find that, depending on the values chosen for displacement and effectiveness parameters, budgetary cost can be greater or less than outlay estimates. However, for plausible values of these parameters, the budgetary cost is calculated to be substantially lower than official estimates, and may even be negative. Copyright 1995 by The Economic Society of Australia.

Suggested Citation

  • Piggott, John & Chapman, Bruce, 1995. "Costing the Job Compact," The Economic Record, The Economic Society of Australia, vol. 71(215), pages 313-328, December.
    • Handle: RePEc:bla:ecorec:v:71:y:1995:i:215:p:313-28
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    Cited by:

    1. Paul Miller, 2000. "Solutions to Unemployment Crisis: Stephen Bell (ed.) The Unemployment Crisis in Australia: Which Way Out?, Cambridge University press, Cambridge, 2000," Agenda - A Journal of Policy Analysis and Reform, Australian National University, College of Business and Economics, School of Economics, vol. 7(4), pages 359-363.
    2. Bruce Chapman, 1998. "Discussion of 'What Works Among Active Labour Market Policies: Evidence from OECD Countries' Experiences'," RBA Annual Conference Volume (Discontinued), in: Guy Debelle & Jeff Borland (ed.),Unemployment and the Australian Labour Market, Reserve Bank of Australia.
    3. Peter B. Dixon & Maureen T. Rimmer, 2005. "The Displacement Effect of Labour-Market Programs: Estimates from the MONASH Model," Centre of Policy Studies/IMPACT Centre Working Papers g-154, Victoria University, Centre of Policy Studies/IMPACT Centre.

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