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Mr. Marcello M. Estevão
Using panel data for 15 industrial countries, active labor market policies (ALMPs) are shown to have raised employment rates in the business sector in the 1990s, after controlling for many institutions, country-specific effects, and economic variables. Among such policies, direct subsidies to job creation were the most effective. ALMPs also affected employment rates by reducing real wages below levels allowed by technological growth, changes in the unemployment rate, and institutional and other economic factors. However, part of this wage moderation may be linked to a composition effect because policies were targeted to low-paid individuals. Whether ALMPs are cost-effective from a budgetary perspective remains to be determined, but they are certainly not substitutes for comprehensive institutional reforms.
Mr. Marcello M. Estevão

also a function of ALMPs. So wages are excluded from the employment rate specification, and the estimated effect of ALMPs on employment rates should already incorporate shifts in wage setting. The benchmark equation is B E i t = β 1 A L M P i t + β 2 X i t + β 3 Y t + β 4 C i + ε i t , ( 1 ) where the indices i and t designate

Mr. Marcello M. Estevão

, are also used. These categories are described in detail in Martin (2000) or Martin and Grubb (2001) . Complete data were available for 15 industrial countries between 1985 and 2000. 13 The estimated equation should be interpreted as a reduced form of a model determining employment rates and wages. As discussed in section II , many of the expected effects of ALMPs on employment will occur through variations in wages, which are also a function of ALMPs. So, wages are excluded from the employment rate specification and the estimated effect of ALMPs on employment

International Monetary Fund

effects of ALMPs on employment will occur through variations in wages, which are also a function of ALMPs. So, wages are excluded from the employment rate specification and the estimated effect of ALMPs on employment rates should already incorporate shifts in wage-setting. The benchmark equation is: BE it = β 1 ⁢ ALMP it + β 2 ⁢ X it + β 3 ⁢ Y t + β 4 ⁢ C i + ε it ( 1 ) Where the indices i and

International Monetary Fund
This Selected Issues paper first explains the recent increase in trend growth and then discusses how labor market and tax policies could best sustain it. This study calculates French trend growth estimating simultaneously a Cobb–Douglas production technology and total factor productivity. The main conclusion is that French trend growth indeed increased during the second half of the 1990s to an average annual rate of 2.1 percent, from 1.8 percent in 1993. This was not owing to a recovery of total factor productivity growth.
International Monetary Fund. Research Dept.
This is the first issue of IMF Staff Papers published under a special partnership between the IMF and Palgrave Macmillan. Very little will change with regard to the journal's visual appearance, though significant service quality enhancements (e.g., an on-line interactive edition) will rollout before the end of 2007. For more information and regular updates, please access http://www.palgrave-journals.com/imfsp/index.html.