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The political economy of public employment programs

  • Fredriksson, Peter

In this paper we study the consequences of endogenous active labor market policies. In particular it is assumed that all viable policies have to please the employed majority. The main objective is to seek the answer to the following question: In what sense does the political equilibrium deviate from the welfare optimum? We find that the political process yields excessive program activity under highly plausible circumstances. Thereason for this deviation from constrained efficiency is that active labor market policy inflicts costs on firms that are ignored by the employed.

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File URL: http://www.sciencedirect.com/science/article/B6V76-3WG36Y6-8/2/1edf865dbad25eaeef438c504c9538fc
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Article provided by Elsevier in its journal Journal of Public Economics.

Volume (Year): 72 (1999)
Issue (Month): 3 (June)
Pages: 487-504

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Handle: RePEc:eee:pubeco:v:72:y:1999:i:3:p:487-504
Contact details of provider: Web page: http://www.elsevier.com/locate/inca/505578

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  1. Anders Forslund & Alan B. Krueger, 1994. "An Evaluation of the Swedish Active Labor Market Policy: New and Received Wisdom," NBER Working Papers 4802, National Bureau of Economic Research, Inc.
  2. Rafael Di Tella & Robert J. MacCulloch, 2002. "The Determination of Unemployment Benefits," Journal of Labor Economics, University of Chicago Press, vol. 20(2), pages 404-434, Part.
  3. Diamond, Peter A., 1980. "An alternative to steady-state comparisons," Economics Letters, Elsevier, vol. 5(1), pages 7-9.
  4. Wright, Randall, 1986. "The redistributive roles of unemployment insurance and the dynamics of voting," Journal of Public Economics, Elsevier, vol. 31(3), pages 377-399, December.
  5. Hosios, Arthur J, 1990. "On the Efficiency of Matching and Related Models of Search and Unemployment," Review of Economic Studies, Wiley Blackwell, vol. 57(2), pages 279-98, April.
  6. P. Diamond, 1980. "Mobility Costs, Frictional Unemployment and Efficiency," Working papers 257, Massachusetts Institute of Technology (MIT), Department of Economics.
  7. Oliver Jean Blanchard & Peter Diamond, 1989. "The Beveridge Curve," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 20(1), pages 1-76.
  8. Pissarides, Christopher A, 1985. "Short-run Equilibrium Dynamics of Unemployment Vacancies, and Real Wages," American Economic Review, American Economic Association, vol. 75(4), pages 676-90, September.
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