Active labour-market policies and output growth - is there a causal relationship?
While the labour-market impact of ALMP interventions has been extensively studied, an issue that has not been widely addressed in the literature is to what extent active labour-market policies have beneficial effects for the whole economy at the macroeconomic level. This paper addresses this issue by examining how additional resources allocated to active labour-market policies relate to output-growth rates. It also examines the sensitivity of the growth-ALMP relationship to the economy's business-cycle position and the state of market expectations. Using data from OECD countries during 1991-2011, we find evidence of a positive output-growth differential due to implementing active labour-market policies in normal times of between 0.004 and 0.005 percentage point. This differential becomes larger during economic upturns and when market expectations are optimistic. These results are obtained after controlling for other standard, direct and indirect, influences on output-growth rates and after addressing the issue of potential endogeneities.
|Date of creation:||Jul 2017|
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