Abstract
Active Labor Market Programs: Employment Gain or Fiscal Drain?
Highlights
Advocated by the OECD, active labor market programs (ALMPs) are of growing interest and relevance due to increasing unemployment for transition and developing countries
This paper aims to bridge the gap between understanding cost-effective ALMPs and boosting post-crisis recoveries
2 Categories of ALMPs We present a new perspective on ALMPs by classifying them depending on their main objective
Summary
Advocated by the OECD, ALMPs are of growing interest and relevance due to increasing unemployment for transition and developing countries. While short-run evaluations of ALMPs have not conveyed a consistent message on the cost-effectiveness, new longer-term evaluations clearly indicate cost-effectiveness from a longer-term perspective This contrast is especially highlighted for training programs; evidence shows significantly positive long-run impacts. ALMPs that provide incentives for retaining existing employment consist of financial incentives to employers to continue their current employment relationship with workers and thereby aim to decrease outflow from employment These measures are generally adopted for a limited period of time, support employed workers and are targeted at jobs at risk. Short work schedules or work sharing programs are more complex subsidy programs; they incentivize employers to reduce labor costs along the intensive margin in contrast to the extensive margin while fully or partly reimbursing workers for hours not worked8
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