DP1205 A Framework for Analysing the Political Support for Active Labour Market Policy

Author(s): Gilles Saint-Paul
Publication Date: June 1995
Keyword(s): Labour Market Policy, Political Economy, Unemployment, Wage Formation
JEL(s): D72, D78, E24, J68
Programme Areas: International Macroeconomics
Link to this Page: cepr.org/active/publications/discussion_papers/dp.php?dpno=1205

We develop a general equilibrium analysis of the impact of active labour 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, there may be political support for policies which actually raise the equilibrium level of total unemployment.