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What active labor market policy works in a recession?

Author

Listed:
  • Forslund, Anders

    () (IFAU - Institute for Labour Market Policy Evaluation)

  • Fredriksson, Peter

    () (Department of Economics, Stockholm University)

  • Vikström, Johan

    () (IFAU - Institute for Labour Market Policy Evaluation)

Abstract

This paper discusses the case for expanding active labor market policy in recession. We find that there is reasonable case for relying more heavily on certain kinds of programs. The argument is tied to the varying size of the lock-in effect in boom and recession. If programs with relatively large lock-in effects should ever be used, they should be used in a downturn. The reason is simply that the cost of forgoing search time is lower in recession. We also provide new evidence on the relative effectiveness of different kinds of programs over the business cycle. In particular we compare an on-the-job training scheme with (traditional) labor market training. We find that labor market training is relatively more effective in recession. This result is consistent with our priors since labor market training features relative large lock-in effects.

Suggested Citation

  • Forslund, Anders & Fredriksson, Peter & Vikström, Johan, 2011. "What active labor market policy works in a recession?," Working Paper Series 2011:2, IFAU - Institute for Evaluation of Labour Market and Education Policy.
    • Handle: RePEc:hhs:ifauwp:2011_002
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    References listed on IDEAS

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    1. David Card & Jochen Kluve & Andrea Weber, 2010. "Active Labour Market Policy Evaluations: A Meta-Analysis," Economic Journal, Royal Economic Society, vol. 120(548), pages 452-477, November.
    2. Fredriksson, Peter & Holmlund, Bertil, 2001. "Optimal Unemployment Insurance in Search Equilibrium," Journal of Labor Economics, University of Chicago Press, vol. 19(2), pages 370-399, April.
    3. Peter Fredriksson & Bertil Holmlund, 2006. "Optimal unemployment insurance design: Time limits, monitoring, or workfare?," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 13(5), pages 565-585, September.
    4. Erica L. Groshen & Simon M. Potter, 2003. "Has structural change contributed to a jobless recovery?," Current Issues in Economics and Finance, Federal Reserve Bank of New York, vol. 9(Aug).
    5. Schmieder, Johannes F. & Wachter, Till von & Bender, Stefan, 2010. "The effects of unemployment insurance on labor supply and search outcomes : regression discontinuity estimates from Germany," IAB Discussion Paper 201004, Institut für Arbeitsmarkt- und Berufsforschung (IAB), Nürnberg [Institute for Employment Research, Nuremberg, Germany].
    6. Michael Lechner & Conny Wunsch, 2009. "Are Training Programs More Effective When Unemployment Is High?," Journal of Labor Economics, University of Chicago Press, vol. 27(4), pages 653-692, October.
    7. Conny Wunsch, 2013. "Optimal Use of Labor Market Policies: The Role of Job Search Assistance," The Review of Economics and Statistics, MIT Press, vol. 95(3), pages 1030-1045, July.
    8. Kluve, Jochen, 2010. "The effectiveness of European active labor market programs," Labour Economics, Elsevier, vol. 17(6), pages 904-918, December.
    9. Chinhui Juhn & Kevin M. Murphy & Robert H. Topel, 1991. "Why Has the Natural Rate of Unemployment Increased over Time?," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 22(2), pages 75-142.
    10. Fredriksson, Peter & Johansson, Per, 2008. "Dynamic Treatment Assignment," Journal of Business & Economic Statistics, American Statistical Association, vol. 26, pages 435-445.
    11. Raaum, Oddbjørn & Torp, Hege & Zhang, Tao, 2003. "Business cycles and the impact of labour market programmes," Memorandum 14/2002, Oslo University, Department of Economics.
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    Citations

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    Cited by:

    1. repec:eee:labeco:v:47:y:2017:i:c:p:182-201 is not listed on IDEAS
    2. Bergemann, Annette & Pohlan, Laura & Uhlendorff, Arne, 2017. "The impact of participation in job creation schemes in turbulent times," Labour Economics, Elsevier, vol. 47(C), pages 182-201.
    3. repec:wfo:monber:y:2017:i:6 is not listed on IDEAS
    4. Christine Erhel & Charlotte Levionnois, 2013. "Labour Market Policies in Times of Crisis: A Comparison of the 1992-1993 and 2008-2010 Recessions," Université Paris1 Panthéon-Sorbonne (Post-Print and Working Papers) halshs-00880933, HAL.
    5. Andreas I. Mueller, 2017. "Separations, Sorting, and Cyclical Unemployment," American Economic Review, American Economic Association, vol. 107(7), pages 2081-2107, July.
    6. Jahn, Elke J. & Rosholm, Michael, 2018. "The Cyclicality of the Stepping-Stone Effect of Temporary Agency Employment," IZA Discussion Papers 11377, Institute for the Study of Labor (IZA).
    7. repec:ilo:ilowps:481497 is not listed on IDEAS
    8. Kluve, Jochen, 2013. "Aktive Arbeitsmarktpolitik: Maßnahmen, Zielsetzungen, Wirkungen," Working Papers 07/2013, German Council of Economic Experts / Sachverständigenrat zur Begutachtung der gesamtwirtschaftlichen Entwicklung.
    9. Christine Erhel & Charlotte Levionnois, 2015. "Labour Market Policies in Times of Crisis: A Reaction Function Approach for the Period 1985–2010," LABOUR, CEIS, vol. 29(2), pages 141-162, June.
    10. Michael Wiberg & Staffan Marklund & Kristina Alexanderson, 2017. "Transitions Between Compensated Work Disability, Joblessness, and Self-Sufficiency: A Cohort Study 1997–2010 of Those Jobless in 1995," Population Research and Policy Review, Springer;Southern Demographic Association (SDA), vol. 36(1), pages 85-107, February.
    11. repec:wfo:monber:y:2017:i:6:p:493-505 is not listed on IDEAS

    More about this item

    Keywords

    Active labor market policy; business cycle; unemployment;

    JEL classification:

    • J08 - Labor and Demographic Economics - - General - - - Labor Economics Policies
    • J64 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Unemployment: Models, Duration, Incidence, and Job Search
    • J68 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Public Policy

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