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Do Active Labor Market Policies Increase Employment?

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  • Marcello M. Estevão

Abstract

Using panel data for 15 industrial countries, active labor market policies (ALMPs) are shown to have raised employment rates in the business sector in the 1990s, after controlling for many institutions, country-specific effects, and economic variables. Among such policies, direct subsidies to job creation were the most effective. ALMPs also affected employment rates by reducing real wages below levels allowed by technological growth, changes in the unemployment rate, and institutional and other economic factors. However, part of this wage moderation may be linked to a composition effect because policies were targeted to low-paid individuals. Whether ALMPs are cost-effective from a budgetary perspective remains to be determined, but they are certainly not substitutes for comprehensive institutional reforms.

Suggested Citation

  • Marcello M. Estevão, 2003. "Do Active Labor Market Policies Increase Employment?," IMF Working Papers 03/234, International Monetary Fund.
  • Handle: RePEc:imf:imfwpa:03/234
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    Citations

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    Cited by:

    1. Maciej Bukowski & Grzegorz Koloch & Piotr Lewandowski & Anna Baranowska & Iga Magda & Arkadiusz Szydlowski & Jacek Bielinski & Magdalena Bober & Malgorzata Sarzalska & Julian Zawistowski, 2008. "Employment in Poland 2007. Security on a Flexible Labour Market," Books and Reports published by IBS, Instytut Badan Strukturalnych, number zwp2007 edited by Maciej Bukowski.
    2. John Martin, 2015. "Activation and active labour market policies in OECD countries: stylised facts and evidence on their effectiveness," IZA Journal of Labor Policy, Springer;Forschungsinstitut zur Zukunft der Arbeit GmbH (IZA), vol. 4(1), pages 1-29, December.
    3. David C. Maré, 2005. "Indirect Effects of Active Labour Market Policies," Working Papers 05_01, Motu Economic and Public Policy Research.
    4. Tvrdon, Michal, 2007. "Labour Market Flexibility: the Case of Visegrad Countries," MPRA Paper 12314, University Library of Munich, Germany.
    5. International Monetary Fund, 2005. "Israel; Selected Issues," IMF Staff Country Reports 05/134, International Monetary Fund.
    6. Marcello M. Estevão, 2004. "Why is Productivity Growth in the Euro Area so Sluggish?," IMF Working Papers 04/200, International Monetary Fund.
    7. Loughrey, Jason & Donnellan, Trevor & Hanrahan, Kevin & Hennessy, Thia, 2013. "Agricultural Labour Market Flexibility in the EU and Candidate Countries," Working Papers 155707, Factor Markets, Centre for European Policy Studies.
    8. Marcello M. Estevão, 2005. "Product Market Regulation and the Benefits of Wage Moderation," IMF Working Papers 05/191, International Monetary Fund.
    9. Estevão, Marcello & Nargis, Nigar, 2005. "Structural Labor Market Changes in France," IZA Discussion Papers 1621, Institute for the Study of Labor (IZA).

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    Keywords

    Consumption; Labor demand; Wages; Unemployment; employment rate; labor market policies; bargaining; employment; labor market; employment rates; Production and Organizations;

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