engleski

The Effects of Labour Market Policy Spending Shocks: Does it Matter Where We Are in the Business Cycle?

In this paper we propose a three-step approach to estimate dynamic effects of active (ALMP) and passive labour market policy (PLMP) spending shocks on labour market outcomes and GDP. In the first step, we estimate common and country-specific static factors using a hierarchical principal components analysis. In the second step, we specify country-specific semistructural factor-augmented vector autoregression (FAVAR) models with a non- modelled exogenous common component, and recursively identify LMP spending shocks. In the third step, we apply a local projections (LP) estimator on a panel of 15 EU countries during the period from 2001 to 2017. The third step enables us to compute linear (business cycle independent) and non-linear (business cycle dependent) effects of FAVAR identified LMP spending shocks on labour market outcomes and GDP. Our results show that ALMP spending shocks have positive mid- to long-run effects on labour market outcomes and growth. These positive effects are more pronounced in the long-run and during expansionary phases. On the contrary, PLMP spending shocks have negative mid- to long-run effects on labour market outcomes and growth with negative effects being more pronounced in the mid-run and during recessionary phases. However, during recessionary periods, positive PLMP spending shocks seem to act countercyclically in the short run.

Labour Market Policies ; Labour Market Outcomes ; Business Cycle

nije evidentirano