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The Efficiency of Active Labour Market Policies in the European Union: Does It Make Sense Increasing the Bill?

Juan González Alegre ()
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Juan González Alegre: Department of Economics, University of Málaga, and Department of Applied Economics of Autonomous University of Barcelona, Spain

Acta Oeconomica, 2017, vol. 67, issue 3, 333-357

Abstract: This paper evaluates the efficiency of Active Labour Market Policies (ALMPs) in the European Union (EU). The paper first reviews the main trends governing the evolution of the European Social Fund (ESF) since its creation. The ESF promotes public expenditure in ALMPs in order to foster social cohesion across the EU. In order to test to what extent this strategy can be backed up by facts, we estimate the impact of public expenditure on ALMPs on the employment rate using panel data from 28 European countries (1985–2011), taking into account the endogeneity of the explanatory variables and the dynamic behaviour of their relationship. Results support the hypothesis that expenditure in ALMPs is more beneficial for employment than aggregate public expenditure. In addition, we show that periphery countries observe a larger efficiency of their ALMPs. These results support the recent policy strategy undertaken by the European Commission to raise the budget devoted to ESF in Member States experiencing higher unemployment rates.

Keywords: Active Labour Market Policies; European Social Fund; panel data; intergovernmental relations (search for similar items in EconPapers)
JEL-codes: C23 H53 H77 J48 (search for similar items in EconPapers)
Date: 2017
Note: This work was supported by the “Cátedra Pasqual Maragall de Economia y Territorio” under the “Ayudas a la Investigación 2012” grants program, the ”Generalitat de Catalunya AGAUR” research grants program (Grant no. 2014-SGR-1326) and the Spanish Ministry of Economics (Grant no. ECO2014-52999-R), whose patronage is gratefully acknowledged.
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