Event Title

The effectiveness of ALMPs in reducing unemployment in the EU countries with particular reference to the role and size of the informal sector

Session

Management, Business and Economics

Description

This paper investigates the efficiency of Active Labour Market Policies (ALMP) in European labour markets by applying two different methodological approaches. The first approachis a matching function using country-level annual data from 2010 to 2015 and a sample of 14 EU countries. Matching efficiency is analysed via a panel Fixed and Random Effects estimation. The second empirical approach uses annual data in a larger sample of 27 EU countries for the period 2005 to 2015 time periodand applies Generalised Methods of Moments (GMM). The results from the first empirical approach suggest that the ALMPs have a statistically significant effect in increasing matching efficiency; however, the economic impact is quite small. Additionally, the estimation also findsevidence to suggest that the labour markets in the EU countries might exhibit increasing returns to scale. In such case, the positive externalities of the search intensity of unemployed workers and vacancies might prevail creating multiple equilibria in the labour market. Estimations also suggest that this result is more likely driven by labour markets in the transition economies and not by those of Western economies. The results from the second empirical approach do not suggest asignificant effect of ALMPs. Overall, the study provides limited evidence supporting the significant role of ALMPs in reducing unemployment and offers insightful findings for the policy-making community.

Keywords:

ALMPs, unemployment, matching function, multiple equilibria, GMM

Session Chair

Edmond Hajrizi

Session Co-Chair

Naim Preniqi

Proceedings Editor

Edmond Hajrizi

ISBN

978-9951-437-54-7

Location

Durres, Albania

Start Date

27-10-2017 1:00 PM

End Date

27-10-2017 2:30 PM

DOI

10.33107/ubt-ic.2017.271

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Oct 27th, 1:00 PM Oct 27th, 2:30 PM

The effectiveness of ALMPs in reducing unemployment in the EU countries with particular reference to the role and size of the informal sector

Durres, Albania

This paper investigates the efficiency of Active Labour Market Policies (ALMP) in European labour markets by applying two different methodological approaches. The first approachis a matching function using country-level annual data from 2010 to 2015 and a sample of 14 EU countries. Matching efficiency is analysed via a panel Fixed and Random Effects estimation. The second empirical approach uses annual data in a larger sample of 27 EU countries for the period 2005 to 2015 time periodand applies Generalised Methods of Moments (GMM). The results from the first empirical approach suggest that the ALMPs have a statistically significant effect in increasing matching efficiency; however, the economic impact is quite small. Additionally, the estimation also findsevidence to suggest that the labour markets in the EU countries might exhibit increasing returns to scale. In such case, the positive externalities of the search intensity of unemployed workers and vacancies might prevail creating multiple equilibria in the labour market. Estimations also suggest that this result is more likely driven by labour markets in the transition economies and not by those of Western economies. The results from the second empirical approach do not suggest asignificant effect of ALMPs. Overall, the study provides limited evidence supporting the significant role of ALMPs in reducing unemployment and offers insightful findings for the policy-making community.