Abstract
We develop a general equilibrium analysis of the impact of active labor market policy on unemployment, wages and the welfare of the employed. This framework is used to assess the political support in favour of such policies and to relate it to the working of such policies and other parameters characterizing the economic environment. The main finding is that if the employed have little exposure to unemployment and if the demand for unskilled labour is inelastic, then there may be political support for policies which actually raise the equilibrium level of total unemployment.
Original language | English (US) |
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Pages (from-to) | 151-165 |
Number of pages | 15 |
Journal | Journal of Public Economics |
Volume | 67 |
Issue number | 2 |
DOIs | |
State | Published - Feb 1 1998 |
Keywords
- D72
- D78
- E24
- J68
- Labour market policy
- Political economy
- Unemployment
- Wage formation
ASJC Scopus subject areas
- Finance
- Economics and Econometrics