Can Active Labor Market Policy Be Counter-Productive?

28 Pages Posted: 25 Oct 2014

See all articles by Gilles Saint-Paul

Gilles Saint-Paul

University of Toulouse I - GREMAQ-IDEI; Centre for Economic Policy Research (CEPR); CESifo (Center for Economic Studies and Ifo Institute); IZA Institute of Labor Economics

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Abstract

We study active labor market policies (ALMP) in a matching model. ALMPs are modelled as a subsidy to job search. Workers differ in their productivity, and search takes place along an extensive margin. An additional job seeker affects the quality of unemployed workers. As a result, the Hosios conditions are no longer valid. To replicate the optimum the worker share in bargaining must exceed the Hosios level, and one must impose a tax on job search activity. The coalition in favor of ALMP is also studied.

Keywords: active labor market policy, matching models

JEL Classification: E24, J6

Suggested Citation

Saint-Paul, Gilles, Can Active Labor Market Policy Be Counter-Productive?. IZA Discussion Paper No. 8551. Available at SSRN: https://ssrn.com/abstract=2514744

Gilles Saint-Paul (Contact Author)

University of Toulouse I - GREMAQ-IDEI ( email )

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Centre for Economic Policy Research (CEPR)

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CESifo (Center for Economic Studies and Ifo Institute)

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Germany

IZA Institute of Labor Economics

P.O. Box 7240
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