Active Labour Market Programmes and Unemployment in a Dual Labour Market
The paper presents a theoretical analysis of the macroeconomic effects of active labour market programmes in a dual labour-market framework. The paper uses the Shapiro-Stiglitz efficiency-wage model. Active labour market programmes train unskilled labour and transfer them from a high-unemployment to a low-unemployment sector. Programmes have a direct labour-transfer effect which tends to reduce total unemployment. They also have effects on wages via expectations. The later effects were to a very large extent neglected in earlier discussions of active labour-market policy. The model formally identifies and defines the effects on wages via expectations. The net sign of the latter effects depend on how programmes are targeted. In general, the net effect on unemployment is ambiguous. The model explains the conditions under which active labour market programmes reduce aggregate unemployment.
|Date of creation:||Sep 1998|
|Date of revision:|
|Contact details of provider:|| Postal: Department of Economics, Stockholm, S-106 91 Stockholm, Sweden|
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- Holmlund, B. & Linden, J., 1991.
"Job Matching, Temporary Public Employment, and Equilibrium Unemployment,"
1991l, Uppsala - Working Paper Series.
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- Johnson, G.E. & Layard, P.R.G., 1987. "The natural rate of unemployment: Explanation and policy," Handbook of Labor Economics, in: O. Ashenfelter & R. Layard (ed.), Handbook of Labor Economics, edition 1, volume 2, chapter 16, pages 921-999 Elsevier.
- Layard, Richard & Nickell, Stephen, 1986. "Unemployment in Britain," Economica, London School of Economics and Political Science, vol. 53(210(S)), pages S121-69, Supplemen.
- Calmfors, L. & Skedinger, P., 1995.
"Does Active Labour Market Policy Increase Employment? - Theoretical Considerations and Some Empirical Evidence from Sweden,"
590, Stockholm - International Economic Studies.
- Calmfors, Lars & Skedinger, Per, 1995. "Does Active Labour-Market Policy Increase Employment? Theoretical Considerations and Some Empirical Evidence from Sweden," Oxford Review of Economic Policy, Oxford University Press, vol. 11(1), pages 91-109, Spring.
- Calmfors, Lars & Skedinger, Per, 1995. "Does Active Labor Market Policy Increase Employment? Theoretical Considerations and Some Empirical Evidence from Sweden," Working Paper Series 429, Research Institute of Industrial Economics.
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