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Labor Market Policy Evaluation in Equilibrium: Some Lessons of the Job Search and Matching Model

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  • Cahuc, Pierre

    () (Ecole Polytechnique, Paris)

  • Le Barbanchon, Thomas

    () (Bocconi University)

Abstract

We analyze the consequences of counseling provided to job seekers in a standard job search and matching model. It turns out that neglecting equilibrium effects induced by counseling can lead to wrong conclusions. In particular, counseling can increase steady state unemployment although counseled job seekers exit unemployment at a higher rate than the non-counseled. Dynamic analysis shows that permanent and transitory policies can have effects of opposite sign on unemployment.

Suggested Citation

  • Cahuc, Pierre & Le Barbanchon, Thomas, 2008. "Labor Market Policy Evaluation in Equilibrium: Some Lessons of the Job Search and Matching Model," IZA Discussion Papers 3687, Institute for the Study of Labor (IZA).
  • Handle: RePEc:iza:izadps:dp3687
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    References listed on IDEAS

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    Cited by:

    1. Mariusz Zielinski, 2015. "Unemployment And Labor Market Policy In Visegrad Group Countries," Equilibrium. Quarterly Journal of Economics and Economic Policy, Institute of Economic Research, vol. 10(3), pages 185-201, September.
    2. Bruno Crépon & Esther Duflo & Marc Gurgand & Roland Rathelot & Philippe Zamora, 2013. "Do Labor Market Policies have Displacement Effects? Evidence from a Clustered Randomized Experiment," The Quarterly Journal of Economics, Oxford University Press, vol. 128(2), pages 531-580.
    3. Torben M. Andersen & Michael Svarer, 2014. "The Role of Workfare in Striking a Balance between Incentives and Insurance in the Labour Market," Economica, London School of Economics and Political Science, vol. 81(321), pages 86-116, January.
    4. Kelly, Elish & McGuinness, Seamus & O'Connell, Philip J., 2011. "What Can Active Labour Market Policies Do?," Papers EC1, Economic and Social Research Institute (ESRI).
    5. Andersson, Fredrik & Holzer, Harry J. & Lane, Julia & Rosenblum, David & Smith, Jeffrey A., 2013. "Does Federally-Funded Job Training Work? Nonexperimental Estimates of WIA Training Impacts Using Longitudinal Data on Workers and Firms," IZA Discussion Papers 7621, Institute for the Study of Labor (IZA).
    6. Crépon, Bruno & van den Berg, Gerard J., 2016. "Active labor market policies," Working Paper Series 2016:17, IFAU - Institute for Evaluation of Labour Market and Education Policy.
    7. Jeremy Lise & Shannon Seitz & Jeffrey Smith, 2015. "Evaluating search and matching models using experimental data," IZA Journal of Labor Economics, Springer;Forschungsinstitut zur Zukunft der Arbeit GmbH (IZA), vol. 4(1), pages 1-35, December.
    8. Moyen, Stéphane & Stähler, Nikolai, 2009. "Unemployment insurance and the business cycle: prolong benefit entitlements in bad times?," Discussion Paper Series 1: Economic Studies 2009,30, Deutsche Bundesbank.
    9. repec:exl:22evid:v:2014:y:2014:i:4:p:1-21 is not listed on IDEAS
    10. Eleftherios Goulas & Athina Zervoyianni, 2017. "Active labour-market policies and output growth - is there a causal relationship?," Working Paper series 17-20, Rimini Centre for Economic Analysis.
    11. Gautier, Pieter A. & Muller, Paul & van der Klaauw, Bas & Rosholm, Michael & Svarer, Michael, 2012. "Estimating Equilibrium Effects of Job Search Assistance," IZA Discussion Papers 6748, Institute for the Study of Labor (IZA).
    12. Philip Schuster, 2010. "Labor Market Policy Instruments and the Role of Economic Turbulence," University of St. Gallen Department of Economics working paper series 2010 2010-29, Department of Economics, University of St. Gallen.
    13. Gautier, Pieter A. & Muller, Paul & van der Klaauw, Bas & Rosholm, Michael & Svarer, Michael, 2012. "Estimating Equilibrium Effects of Job Search Assistance," IZA Discussion Papers 6748, Institute for the Study of Labor (IZA).
    14. McGuinness, Seamus & O'Connell, Philip J. & Kelly, Elish & Walsh, John R., 2011. "Activation in Ireland: An Evaluation of the National Employment Action Plan," Research Series, Economic and Social Research Institute (ESRI), number RS20.
    15. Launov, Andrey & Wälde, Klaus, 2013. "Thumbscrews for Agencies or for Individuals? How to Reduce Unemployment," IZA Discussion Papers 7659, Institute for the Study of Labor (IZA).
    16. Moyen, Stéphane & Stähler, Nikolai, 2014. "Unemployment Insurance And The Business Cycle: Should Benefit Entitlement Duration React To The Cycle?," Macroeconomic Dynamics, Cambridge University Press, vol. 18(03), pages 497-525, April.

    More about this item

    Keywords

    labor market policy; equilibrium effect; evaluation;

    JEL classification:

    • 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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