The net effect of unemployment benefits, sanctions and training on aggregate unemployment outflows
Van der Linden, Bruno
This paper tries to bridge the gap between the theoretical and empirical analyses of the aggregate impacts of labor market policies (LMPs). Contrary to previous empirical studies, we conduct an econometric analysis based on sound theoretical foundations. The specification is based on an equilibrium job search model where LMPs affect tightness on the labor market. The impacts of a comprehensive set of LMPs on the unemployment outflow rate and on wages are jointly estimated. Taking care of the endogeneity of LMPs, our results for Belgium strongly support the implications of the theoretical model. The replacement ratio and the rate of training have a clear-cut negative effect on the exit rate from insured unemployment. The effect of sanctions on this exit rate appears to be rather small.
evaluation; labor market policies; wage bargaining; equilibrium unemployment; matching function
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