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A Framework for Analyzing the Political Support for Active Labor Market Policy

  • Saint-Paul, G.

We develop a general equilibrium analysis of the impact of active labour market policy on unemployment, wages and the welfare of the employed. This framework is used to assess the political support in favour of such policies and to relate it to the working of such policies and other parameters characterizing the economic environment. The main finding is that if the employed have little exposure to unemployment and if the demand for unskilled labour is inelastic, there may be political support for policies which actually raise the equilibrium level of total unemployment.

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Paper provided by DELTA (Ecole normale supérieure) in its series DELTA Working Papers with number 95-12.

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Length: 18 pages
Date of creation: 1995
Date of revision:
Publication status: Published in Journal of Public Economics, 1998, 67, pp. 151-165
Handle: RePEc:del:abcdef:95-12
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  1. Kimball, Miles S, 1994. "Labor-Market Dynamics When Unemployment is a Worker Discipline Device," American Economic Review, American Economic Association, vol. 84(4), pages 1045-59, September.
  2. Pissarides, Christopher A, 1992. "Loss of Skill during Unemployment and the Persistence of Employment Shocks," The Quarterly Journal of Economics, MIT Press, vol. 107(4), pages 1371-91, November.
  3. Saint-Paul, Gilles, 1992. "Are the Unemployed Unemployable?," CEPR Discussion Papers 689, C.E.P.R. Discussion Papers.
  4. Georges, Christophre, 1995. "Adjustment costs and indeterminacy in perfect foresight models," Journal of Economic Dynamics and Control, Elsevier, vol. 19(1-2), pages 39-50.
  5. Shapiro, Carl & Stiglitz, Joseph E, 1984. "Equilibrium Unemployment as a Worker Discipline Device," American Economic Review, American Economic Association, vol. 74(3), pages 433-44, June.
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