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Political Cycles in Active Labor Market Policies

  • Mechtel, Mario
  • Potrafke, Niklas

This paper examines how electoral motives and government ideology influence active labor market policies (ALMP). We present a model that explains how politicians strategically use ALMP to generate political cycles in unemployment and the budget deficit. Election-motivated politicians increase ALMP spending before elections irrespective of their party ideology. Leftwing politicians spend more on ALMP than rightwing politicians. We test the hypotheses derived from our model using German state data from 1985:1 to 2004:11. The results suggest that ALMP (job-creation schemes) were pushed before elections.

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Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 22780.

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Date of creation: Mar 2009
Date of revision: May 2010
Handle: RePEc:pra:mprapa:22780
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