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Institutions and Wage Formation in the New Europe

Edited by Gabriel Fagan, Francesco Paolo Mongelli and Julian Morgan

Institutions and Wage Formation in the New Europe addresses the role played by institutions in European wage formation with a focus on EMU and institutional change in labour markets.
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Chapter 11: The impact of active labour market policies in Europe

Julian Morgan and Annabelle Mourougane


Julian Morgan and Annabelle Mourougane1 INTRODUCTION In recent years there has been a growing policy focus on active labour market policies (ALMPs).2 The aim is generally to replace, or complement, other forms of labour market intervention such as unemployment benefits with ‘active measures’. Such measures come in many different forms and include job brokering services, training and job creation. One unifying feature is that, in contrast to unemployment benefits, ‘active’ measures require significant activity on the part of the unemployed. This activity can either be in the form of an increased job search effort, participation in education or training schemes, or undertaking some form of employment. Such measures have the potential to impact on labour supply and in some cases also labour demand and thereby would be expected to have a bearing on wage pressures. The aim of this chapter is to highlight the policy measures that are being undertaken in the EU, review the literature on the effectiveness of such interventions and draw some general conclusions on their likely impact on unemployment and wage formation. With this aim, this chapter begins with a discussion of a conceptual framework, including a typology and brief description of the main types of policies that are classified as ALMPs. This is followed by an analysis of the extent to which such policies are used in Europe, drawing on aggregate statistics and descriptive information on current policy initiatives. Next, there is a review of theoretical considerations and finally an examination of the empirical...

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