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The Efficiency of Active Labour Market Policies in the European Union: Does It Make Sense Increasing the Bill?

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  • Juan González Alegre

    (Department of Economics, University of Málaga, and Department of Applied Economics of Autonomous University of Barcelona, Spain)

Abstract

This paper evaluates the efficiency of Active Labour Market Policies (ALMPs) in the European Union (EU). The paper first reviews the main trends governing the evolution of the European Social Fund (ESF) since its creation. The ESF promotes public expenditure in ALMPs in order to foster social cohesion across the EU. In order to test to what extent this strategy can be backed up by facts, we estimate the impact of public expenditure on ALMPs on the employment rate using panel data from 28 European countries (1985–2011), taking into account the endogeneity of the explanatory variables and the dynamic behaviour of their relationship. Results support the hypothesis that expenditure in ALMPs is more beneficial for employment than aggregate public expenditure. In addition, we show that periphery countries observe a larger efficiency of their ALMPs. These results support the recent policy strategy undertaken by the European Commission to raise the budget devoted to ESF in Member States experiencing higher unemployment rates.

Suggested Citation

  • Juan González Alegre, 2017. "The Efficiency of Active Labour Market Policies in the European Union: Does It Make Sense Increasing the Bill?," Acta Oeconomica, Akadémiai Kiadó, Hungary, vol. 67(3), pages 333-357, September.
    • Handle: RePEc:aka:aoecon:v:67:y:2017:i:3:p:333-357
    Note: This work was supported by the “Cátedra Pasqual Maragall de Economia y Territorio” under the “Ayudas a la Investigación 2012” grants program, the ”Generalitat de Catalunya AGAUR” research grants program (Grant no. 2014-SGR-1326) and the Spanish Ministry of Economics (Grant no. ECO2014-52999-R), whose patronage is gratefully acknowledged.
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    More about this item

    Keywords

    Active Labour Market Policies; European Social Fund; panel data; intergovernmental relations;
    All these keywords.

    JEL classification:

    • C23 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Models with Panel Data; Spatio-temporal Models
    • H53 - Public Economics - - National Government Expenditures and Related Policies - - - Government Expenditures and Welfare Programs
    • H77 - Public Economics - - State and Local Government; Intergovernmental Relations - - - Intergovernmental Relations; Federalism
    • J48 - Labor and Demographic Economics - - Particular Labor Markets - - - Particular Labor Markets; Public Policy

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