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Labor Policies to Raise Employment

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  • Marcello Estevão

Abstract

Using panel data for 15 industrial countries, active labor market policies (ALMPs) are shown to have a positive effect on employment rates, after controlling for institutional variables and country-specific effects. Among such policies, direct subsidies for job creation were the most effective. This paper shows that ALMPs raise employment by improving labor market functioning: higher expenditure on ALMPs is associated with lower wages for given levels of the unemployment rate. Whether ALMPs are cost-effective from a budgetary perspective remain to be determined, but they are certainly not substitutes for comprehensive institutional reforms. In particular, if higher expenditures on ALMPs are financed through increased labor income taxation, it could have deleterious effects on labor utilization. IMF Staff Papers (2007) 54, 113–138. doi:10.1057/palgrave.imfsp.9450004

Suggested Citation

  • Marcello Estevão, 2007. "Labor Policies to Raise Employment," IMF Staff Papers, Palgrave Macmillan, vol. 54(1), pages 113-138, May.
    • Handle: RePEc:pal:imfstp:v:54:y:2007:i:1:p:113-138
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    Cited by:

    1. Alic Birca, 2023. "Active Labor Market Policies In The Republic Of Moldova: Implications For Increasing Employment," Annals - Economy Series, Constantin Brancusi University, Faculty of Economics, vol. 1, pages 77-85, February.
    2. Tino Berger & Freddy Heylen, 2011. "Differences in Hours Worked in the OECD: Institutions or Fiscal Policies?," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 43(7), pages 1333-1369, October.
    3. Mr. Umidjon Abdullaev & Mr. Marcello M. Estevão, 2013. "Growth and Employment in the Dominican Republic: Options for a Job-Rich Growth," IMF Working Papers 2013/040, International Monetary Fund.
    4. Mr. Martin Schindler, 2009. "The Italian Labor Market: Recent Trends, Institutions, and Reform Options," IMF Working Papers 2009/047, International Monetary Fund.

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