Research Papers in Economics, Department of Economics, Stockholm University
What active labor market policy works in a recession?
(), Peter Fredriksson
() and Johan Vikström
Abstract: This paper discusses the case for expanding active labor
market policy in recession. We find that there is reasonable case for
relying more heavily on certain kinds of programs. The argument is tied to
the varying size of the lock-in effect in boom and recession. If programs
with relatively large lock-in effects should ever be used, they should be
used in a downturn. The reason is simply that the cost of forgoing search
time is lower in recession. We also provide new evidence on the relative
effectiveness of different kinds of programs over the business cycle. In
particular we compare an on-the-job training scheme with (traditional)
labor market training. We find that labor market training is relatively
more effective in recession. This result is consistent with our priors
since labor market training features relative large lock-in effects.
Keywords: Active labor market policy; business cycle; unemployment; (follow links to similar papers)
JEL-Codes: J08; J64; J68; (follow links to similar papers)
35 pages, February 15, 2011
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