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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

under the label ofactive labor market policies” (ALMPs). 2 Indeed, during the second half of the 1990s, employment performance improved appreciably in several European countries raising the presumption that such policies actually worked. This paper evaluates the aggregate effect of ALMPs on employment and finds a positive correlation between spending on ALMPs as a percentage of GDP and the employment rate in the business sector in the 1990s, but not in the late 1980s, when such expenditure was still relatively small. Among all the ALMPs, direct subsidies to job

Mr. Marcello M. Estevão and Ms. Evridiki Tsounta

unemployment. These policies could be grouped under the label ofactive labor market policies” (ALMPs) 24 and have been shown to raise labor productivity and employment levels when well targeted, although cost-benefit evaluations are often elusive. 25 In particular, the job bills enacted in response to the recent crisis, which extend unemployment insurance while providing subsidies to net hiring for small businesses, are welcome, since the former ensures that the unemployed receive some income for subsistence purposes, 26 while the latter encourages hiring by firms. 27

International Monetary Fund

directly and to increase job search efficiency. These policies have been grouped under the label ofactive labor market policies” (ALMPs). 25 Indeed, during the second half of the 1990s, employment performance improved appreciably in several European countries, especially in France, raising the presumption that such policies actually worked. 34. This chapter evaluates the aggregate effect of ALMPs on employment and wages and finds a positive correlation between spending on ALMPs as a percentage of GDP and the employment rate in the business sector in the 1990s, but

Mr. Marcello M. Estevão and Ms. Evridiki Tsounta
The recent crisis has had differential effects across U.S. states and industries causing a wide geographic dispersion in skill mismatches and housing market performance. We document these facts and, using data from the 50 states plus D.C from 1991 to 2008, we present econometric evidence that supports that changes in state-level unemployment rates are linked to skill mismatches and housing market performance even after controlling for cyclical effects. This result suggests some causality going from mismatches and housing conditions to unemployment rates. The numerical estimates imply that the structural unemployment rate in 2010 was about 1¾ percentage points higher than before the onset of the housing market meltdown at end-2006. Reversing this increase may require targeted active labor market policies and measures to expedite the adjustment in housing markets, as our results suggest weak housing market conditions interact negatively with skill mismatches to produce higher unemployment rates in the United States.
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.