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Do Active Labor Market Policies Increase Employment?
Author:
Mr. Marcello M. Estevão null

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Series:
IMF Working Papers
Volume/Issue:
Volume 2003: Issue 234
Language:
English
Publication Date:
01 Dec 2003
DOI:
https://doi.org/10.5089/9781451875645.001
ISBN:
9781451875645
ISSN:
1018-5941
Pages:
30
Keywords:
WP; ALMPs Affect Employment; labour market; expenditure; Unemployment; employment rate; labor market policies; wages; bargaining; ALMP expenditure; employment protection index change sign; creation effect; employment protection law; effect of ALMPs; job-search efficiency; replacement rate; employment creation; employment rate specification; labour market training; expenditures in labor market policy; label of active labor market policies; Employment; Active labor market policies; Labor market policy; Europe
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IMF Working Papers describe research in progress by the author(s) and are published to elicit comments and to encourage debate. The views expressed in IMF Working Papers are those of the author(s) and do not necessarily represent the views of the IMF, its Executive Board, or IMF management.
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Using panel data for 15 industrial countries, active labor market policies (ALMPs) are shown to have raised employment rates in the business sector in the 1990s, after controlling for many institutions, country-specific effects, and economic variables. Among such policies, direct subsidies to job creation were the most effective. ALMPs also affected employment rates by reducing real wages below levels allowed by technological growth, changes in the unemployment rate, and institutional and other economic factors. However, part of this wage moderation may be linked to a composition effect because policies were targeted to low-paid individuals. Whether ALMPs are cost-effective from a budgetary perspective remains to be determined, but they are certainly not substitutes for comprehensive institutional reforms.
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Cover IMF Working Papers
IMF Working Papers
ISSN:
1018-5941
Publisher:
International Monetary Fund