Unintended Effects of National-Based Active Labour Market Policies

32 Pages Posted: 8 Mar 2009

See all articles by Carlo Altavilla

Carlo Altavilla

European Central Bank (ECB)

Floro E. Caroleo

CSEF - University of Naples Federico II; IZA Institute of Labor Economics

Abstract

Labour market policies settled at national level imply a "one-size-fits-all" labour market strategy. This strategy might not sufficiently take into account region-specific economic structures. In this paper we employ a panel factor-augmented vector autoregression (FAVAR) to evaluate whether active labour market programs (ALMPs) might asymmetrically affect labour markets at regional level. Given the significant difference between Italian regional economies we separately analyse two areas: the Centre-North and the South. Our results suggest that the timing and magnitude of the reaction of employment rate to ALMP shocks in the two areas is substantially different. Moreover, forecast error variance decomposition highlight that different variables seem to drive employment dynamics. In the South employment is mainly driven by its own shocks and by social and economic context variables. By contrast, in the northern regions, the employment dynamics is significantly explained by the dynamics of nominal and policy variables such as remunerations and ALMP.

Keywords: Active Labour Market Policies, FAVAR

JEL Classification: C33, J64

Suggested Citation

Altavilla, Carlo and Caroleo, Floro Ernesto, Unintended Effects of National-Based Active Labour Market Policies. IZA Discussion Paper No. 4045, Available at SSRN: https://ssrn.com/abstract=1355428 or http://dx.doi.org/10.2139/ssrn.1355428

Carlo Altavilla (Contact Author)

European Central Bank (ECB) ( email )

Sonnemannstrasse 22
Frankfurt am Main, 60314
Germany

Floro Ernesto Caroleo

CSEF - University of Naples Federico II ( email )

Via Amm. F. Acton, 38
80133 Naples, Caserta 80133
Italy
+39-081-5475740 (Phone)
+39-081-5474750 (Fax)

IZA Institute of Labor Economics

P.O. Box 7240
Bonn, D-53072
Germany

Do you have negative results from your research you’d like to share?

Paper statistics

Downloads
65
Abstract Views
687
Rank
617,745
PlumX Metrics