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Unintended Effects of National-based Active Labour Market Policies

  • Altavilla, Carlo

    ()

    (University of Naples Parthenope)

  • Caroleo, Floro Ernesto

    ()

    (University of Naples Parthenope)

Labour market policies settled at national level imply a “one-size-fits-all” labour market strategy. This strategy might not sufficiently take into account region-specific economic structures. In this paper we employ a panel factor-augmented vector autoregression (FAVAR) to evaluate whether active labour market programs (ALMPs) might asymmetrically affect labour markets at regional level. Given the significant difference between Italian regional economies we separately analyse two areas: the Centre-North and the South. Our results suggest that the timing and magnitude of the reaction of employment rate to ALMP shocks in the two areas is substantially different. Moreover, forecast error variance decomposition highlight that different variables seem to drive employment dynamics. In the South employment is mainly driven by its own shocks and by social and economic context variables. By contrast, in the northern regions, the employment dynamics is significantly explained by the dynamics of nominal and policy variables such as remunerations and ALMP.

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Paper provided by Institute for the Study of Labor (IZA) in its series IZA Discussion Papers with number 4045.

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Length: 32 pages
Date of creation: Feb 2009
Date of revision:
Publication status: published in: Regional Studies, 2011, iFirst
Handle: RePEc:iza:izadps:dp4045
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  1. Christopher A. Pissarides & Barbara Petrongolo, 2001. "Looking into the Black Box: A Survey of the Matching Function," Journal of Economic Literature, American Economic Association, vol. 39(2), pages 390-431, June.
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