Substitution and crowding-out effects of active labour market policy

Elke Jahn and Thomas Wagner

No 2, Discussion Papers from Friedrich-Alexander University Erlangen-Nuremberg, Chair of Labour and Regional Economics

Abstract: The search model contains two matching technologies, the public employment service (PES) with its type-specific registers for workers and vacancies, and the search market where firms advertise vacancies and unemployed who have not been placed by the PES search for jobs. The placement activity of the PES increases the bargained wages, reduces active job search, decreases the number of advertised vacancies, but - compared with the laissez- faire regime - increases employment and per capita consumption. Of all the instruments of ALMP, the probabilities of a match, the portion of unskilled not interested in a job, and the hiring subsidies generate crowding-out effects. The productivity of the unskilled, (re-employment)bonuses, penalties for violations of the search rule, and the stringency of the search rule cause crowdingin effects. Assistance for problem groups is less effective than promoting active job search.

Keywords: Matching model; active labor market policy; PES; search market; heterogeneous unemployment pool; ranking (search for similar items in EconPapers)
JEL-codes: J41 J63 J64 J68 (search for similar items in EconPapers)
Date: 2000
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (8)

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