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The political economy of public employment programs

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  • Fredriksson, Peter

Abstract

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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Suggested Citation

  • Fredriksson, Peter, 1999. "The political economy of public employment programs," Journal of Public Economics, Elsevier, vol. 72(3), pages 487-504, June.
  • Handle: RePEc:eee:pubeco:v:72:y:1999:i:3:p:487-504
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    References listed on IDEAS

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    1. Anders Forslund & Alan B. Krueger, 1997. "An Evaluation of the Swedish Active Labor Market Policy: New and Received Wisdom," NBER Chapters,in: The Welfare State in Transition: Reforming the Swedish Model, pages 267-298 National Bureau of Economic Research, Inc.
    2. Diamond, Peter A, 1981. "Mobility Costs, Frictional Unemployment, and Efficiency," Journal of Political Economy, University of Chicago Press, vol. 89(4), pages 798-812, August.
    3. 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.
    4. Diamond, Peter A., 1980. "An alternative to steady-state comparisons," Economics Letters, Elsevier, vol. 5(1), pages 7-9.
    5. 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.
    6. Pissarides, Christopher A, 1985. "Short-run Equilibrium Dynamics of Unemployment Vacancies, and Real Wages," American Economic Review, American Economic Association, vol. 75(4), pages 676-690, September.
    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. Arthur J. Hosios, 1990. "On The Efficiency of Matching and Related Models of Search and Unemployment," Review of Economic Studies, Oxford University Press, vol. 57(2), pages 279-298.
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    Cited by:

    1. Evelyn Ribi, 2009. "Optimal Size and Intensity of Job Search Assistance Programs," University of St. Gallen Department of Economics working paper series 2009 2009-19, Department of Economics, University of St. Gallen.
    2. repec:ebl:ecbull:v:4:y:2007:i:31:p:1-15 is not listed on IDEAS
    3. Calmfors, Lars, 1998. "Unemployment, Labour-Market Reform and Monetary Union," Seminar Papers 639, Stockholm University, Institute for International Economic Studies.
    4. Sunanda Roy, 2007. "Self insurance and public employment programs," Economics Bulletin, AccessEcon, vol. 4(31), pages 1-15.

    More about this item

    JEL classification:

    • D78 - Microeconomics - - Analysis of Collective Decision-Making - - - Positive Analysis of Policy Formulation and Implementation
    • H21 - Public Economics - - Taxation, Subsidies, and Revenue - - - Efficiency; Optimal Taxation
    • J41 - Labor and Demographic Economics - - Particular Labor Markets - - - Labor Contracts

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