The Political Economy of Public Employment Programs
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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|Date of creation:||25 Jan 1997|
|Date of revision:|
|Publication status:||Published in Journal of Public Economics, 1999, pages 487-504.|
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ZEI Working Papers
B 04-2001, ZEI - Center for European Integration Studies, University of Bonn.
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"Mobility Costs, Frictional Unemployment and Efficiency,"
257, Massachusetts Institute of Technology (MIT), Department of Economics.
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