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Oxford Economic Papers Advance Access published online on February 13, 2008
Oxford Economic Papers, doi:10.1093/oep/gpn002
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© Oxford University Press 2008 All rights reserved

The rise (and fall) of labour market programmes: domestic vs. global factors

Noel Gaston* and Gulasekaran Rajaguru{dagger}

*Globalisation and Development Centre and School of Business, Bond University, Gold Coast, Queensland 4229, Australia; e-mail: ngaston{at}bond.edu.au
{dagger}Globalisation and Development Centre and School of Business, Bond University, Gold Coast, Queensland 4229, Australia


  Abstract

We provide a simple model to illustrate that tax and redistributive considerations as well as increasing globalization may lead workers unexposed to the threat of unemployment to prefer government spending on active labour market programmes to passive spending, e.g., on unemployment benefits. In the empirical work, panel data for OECD countries are used to examine the relationship between active and passive labour market spending and various controls relevant for analysing the political economy of labour market policies. Overall, we find that domestic concerns, such as government indebtedness, are far more important determinants of labour market expenditures than global influences.

JEL classifications: J68, H53, C33, P16


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