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Active Labour Market Programmes and Unemployment in a Dual Labour Market

Author

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  • Fukushima, Yoshihiko

    (Dept. of Economics, Stockholm University)

Abstract

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.

Suggested Citation

  • Fukushima, Yoshihiko, 1998. "Active Labour Market Programmes and Unemployment in a Dual Labour Market," Research Papers in Economics 1998:2, Stockholm University, Department of Economics.
    • Handle: RePEc:hhs:sunrpe:1998_0002
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    References listed on IDEAS

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    4. Calmfors, Lars & Lang, Harald, 1995. "Macroeconomic Effects of Active Labour Market Programmes in a Union Wage-Setting Model," Economic Journal, Royal Economic Society, vol. 105(430), pages 601-619, May.
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    8. Assar Lindbeck, 1993. "Unemployment and Macroeconomics," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262121751, December.
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    Cited by:

    1. Calmfors, Lars & Forslund, Anders & Hemström, Maria, 2002. "Does active labour market policy work? Lessons from the Swedish experiences," Working Paper Series 2002:4, IFAU - Institute for Evaluation of Labour Market and Education Policy.
    2. Pierre-Richard Agénor, 2005. "The Analytics of Segmented Labor Markets," Economics Discussion Paper Series 0529, Economics, The University of Manchester.

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    More about this item

    Keywords

    Active labour market programme; unemployment; dual labor market; efficiency wage;
    All these keywords.

    JEL classification:

    • J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials
    • J41 - Labor and Demographic Economics - - Particular Labor Markets - - - Labor Contracts
    • J64 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Unemployment: Models, Duration, Incidence, and Job Search

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