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Costing the Job Compact

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  • JOHN PIGGOTT
  • BRUCE CHAPMAN

Abstract

The budgetary cost of any government program should be measured by its impact on the public sector budget balance, over its effective timeframe. Typically, official cost estimates focus on the value of outlays only, and thus create a misleading impression of the opportunity cost of some policy initiatives. This paper offers estimates of the budgetary cost of the Job Compact, using a simple labour force transition flows model of unemployment. Deadweight, displacement and effectiveness impacts are explicitly addressed. We find that, depending on the values chosen for displacement and effectiveness parameters, budgetary cost can be greater or less than outlay estimates. However, for plausible values of these parameters, the budgetary cost is calculated to be substantially lower than official estimates, and may even be negative.

Suggested Citation

  • John Piggott & Bruce Chapman, 1995. "Costing the Job Compact," The Economic Record, The Economic Society of Australia, vol. 71(4), pages 313-328, December.
    • Handle: RePEc:bla:ecorec:v:71:y:1995:i:4:p:313-328
    DOI: 10.1111/j.1475-4932.1995.tb02677.x
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    References listed on IDEAS

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    Cited by:

    1. Peter B. Dixon & Maureen T. Rimmer, 2005. "The Displacement Effect of Labour-Market Programs: Estimates from the MONASH Model," Centre of Policy Studies/IMPACT Centre Working Papers g-154, Victoria University, Centre of Policy Studies/IMPACT Centre.
    2. Bruce Chapman & Cezary Kapuscinsky, 2001. "The Transformation of Australia's Population, 1970 to 2030 Labour Force, Employment and Unemployment," CEPR Discussion Papers 436, Centre for Economic Policy Research, Research School of Economics, Australian National University.

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