Political Cycles in Active Labor Market Policies

Mario Mechtel and Niklas Potrafke

MPRA Paper from University Library of Munich, Germany

Abstract: This paper examines a framework in which politicians can decrease unemployment via active labor market policies (ALMP). We combine theoretical models on partisan and opportunistic cycles and assume that voters are ignorant of the necessary facts to make informed voting decisions. The model predicts that politicians have incentives for a strategic use of active labor market policies that leads to a political cycle in unemployment and budget deficit. We test the hypotheses predicted by the theoretical model using data from German states from 1985:1 to 2004:11. The results illustrate that opportunistic behavior of politicians can explain the development of ALMP approximated by job-creation schemes.

Keywords: active labor market policies; political cycles; labor market expenditures; opportunistic politicians; partisan politicians (search for similar items in EconPapers)
JEL-codes: E62 H61 H72 J08 P16 (search for similar items in EconPapers)
Date: 2009
New Economics Papers: this item is included in nep-cdm, nep-lab and nep-pol
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

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Related works:
Working Paper: Political Cycles in Active Labor Market Policies (2010)
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Persistent link: https://EconPapers.repec.org/RePEc:pra:mprapa:14270

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