DP10270 Can active labor market policy be counter-productive?
|Publication Date:||November 2014|
|Keyword(s):||active labor market policies, Hosios condition, job matching|
|JEL(s):||E24, E32, J41, J63, J64|
|Programme Areas:||International Macroeconomics, Labour Economics|
|Link to this Page:||www.cepr.org/active/publications/discussion_papers/dp.php?dpno=10270|
We study active labor market policies (ALMP) in a matching model. ALMPs are modelled as a subsidy to job search. Workers differ in their productivity, and search takes place along an extensive margin. An additional job seeker affects 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 As a result, the Hosios conditions are no longer valid.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.