Active versus Passive Policies of Unemployment: Growth and Public Finance Perspectives

Rangan Gupta and Charlotte du Toit
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Charlotte du Toit: Department of Economics, University of Pretoria

No 200620, Working Papers from University of Pretoria, Department of Economics

Abstract: This paper develops a general equilibrium endogenous growth model in an overlapping generations framework, and compares, in terms of economic growth, a passive unemployment policy (unemployment insurance) with an active unemployment policy (government expenditures targeted towards improving the job- finding probability of an unemployed). Besides, the standard result of unemployment being growth reducing, under realistic parameterization, we show that the government, under an active policy, can generate higher growth without any compromise on its own consumption, when compared to the unemployment benefit regime. The result, however, depends crucially on the efficiency with which the resources are spent in creating employment.

Keywords: Active and Passive Policies of Unemployment; Unemployment Benefits; Endogenous Growth (search for similar items in EconPapers)
JEL-codes: E24 H55 J64 O41 (search for similar items in EconPapers)
Pages: 14 pages
Date: 2006-10
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Citations: View citations in EconPapers (1)

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Persistent link: https://EconPapers.repec.org/RePEc:pre:wpaper:200620

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