The Rise (and Fall) of Labour Market Programmes: The Role of Global and Domestic Factors

We study the political economy of labour market policies. First, it is shown that tax and redistributive considerations lead inside workers to prefer spending on active labour market programmes to passive spending, e.g., on unemployment benefits. We also show that greater active spending may be a feature of globalising economies. In the empirical work, panel data for OECD countries are used to examine the relationship between active and passive labour market spending, various measures of globalisation and controls relevant for analysing the political economy of labour market policies. Overall, we find that factors other than globalisation are more important determinants of labour market expenditures.