Can active labor market policy be counter-productive?

Gilles Saint-Paul (1, 2, 3)

1 New York University [Abu Dhabi]
2 PSE - Paris-Jourdan Sciences Economiques
3 PSE - Paris School of Economics

We study active labor market policies (ALMP) in a matching model. ALMPs are modelled as a subsidy to job search. Workers di¤er in their productivity, and search takes place along an extensive margin. An additional job seeker a¤ects the quality of unemployed workers. As a result, the Hosios conditions are no longer valid.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. The coalition in favor of ALMP is also studied.

Keywords: Active labor market policy; Matching models

Domains: Humanities and Social Sciences; Economics and Finance

Gilles Saint-Paul. Can active labor market policy be counter-productive?. 2014. ⟨hal-01084570⟩