Can active labor market policy be counter-productive?

Gilles Saint-Paul

Research output: Contribution to journalArticlepeer-review

Abstract

We study active labor market policies (ALMP) in a matching model with heterogenous workers. ALMPs are modeled as a subsidy to job search, and search takes place along an extensive margin. An additional job seeker affects the quality of unemployed workers. As a result, the Hosios conditions for efficiency are no longer valid: to replicate the optimum the worker share in bargaining must exceed the Hosios level, and one must impose a tax on job search activity. We also characterize the coalition in favor of ALMP.

Original languageEnglish (US)
Pages (from-to)26-36
Number of pages11
JournalResearch in Economics
Volume69
Issue number1
DOIs
StatePublished - Mar 1 2015

Keywords

  • Active labor market policies
  • Hosios condition
  • Job matching

ASJC Scopus subject areas

  • Economics and Econometrics

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