Working Paper: CEPR ID: DP10270
Authors: Gilles Saint-Paul
Abstract: 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 As a result, the Hosios conditions are no longer valid.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.
Keywords: Active Labor Market Policies; Hosios Condition; Job Matching
JEL Codes: E24; E32; J41; J63; J64
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| ALMP (J68) | average quality of job seekers (J24) |
| average quality of job seekers (J24) | job finding rate (J68) |
| ALMP (J68) | job finding rate (J68) |
| worker share in bargaining (J52) | optimal outcome (L21) |
| imposed tax on job search activity (J68) | counterbalance increased bargaining power of workers (J52) |
| ALMP benefits less productive job seekers (J68) | negatively impacts more productive workers (J29) |
| ALMP (J68) | coalition favoring these policies among least productive groups (D72) |
| ALMP (J68) | aggregate welfare (E10) |