Unemployment Benefits, Active Labor Market Policies, and Labor Market Outcomes : Evidence from New Global Data

Using a novel data, this paper examines unemployment benefits and active labor market policies across 191 countries in 2019-2020 and assesses their linkages with labor market outcomes. In 2019, 48 percent of countries had unemployment benefit schemes and 85 percent adopted active labor market policies. While both policies correlate with a country's income level, unemployment benefits are scarce in low-income countries, with only 10 percent having such schemes. Therefore, amid the Covid-19 pandemic, developing countries prioritized active labor market policies and social assistance, while high-income countries employed diverse approaches. The key econometric findings indicate a positive link between labor market policies and productivity growth in low-income and upper-middle-income countries. The association of unemployment benefits and active labor market policies with aggregate unemployment and employment rates is mostly insignificant, however, across all income groups, active labor market policies are consistently linked to a decrease in self-employment rates.