Can Active Labor Market Policy Be Counter-Productive?

23 Pages Posted: 2 Dec 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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Date Written: November 2014

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 As a result, the Hosios conditions are no longer valid.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 policies, Hosios condition, job matching

JEL Classification: E24, E32, J41, J63, J64

Suggested Citation

Saint-Paul, Gilles, Can Active Labor Market Policy Be Counter-Productive? (November 2014). CEPR Discussion Paper No. DP10270. Available at SSRN: https://ssrn.com/abstract=2532938

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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United Kingdom

CESifo (Center for Economic Studies and Ifo Institute)

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Munich, DE-81679
Germany

IZA Institute of Labor Economics

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

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