The Political Economy of Active Labor-Market Policy

Abstract

Active labor-market policies (ALMPs) have developed significantly over the past two decades across Organization for Economic Cooperation and Development (OECD) countries, with substantial cross-national differences in terms of both extent and overall orientation. The objective of this article is to account for cross-national variation in this policy field. It starts by reviewing existing scholarship concerning political, institutional, and ideational determinants of ALMPs. It then argues that ALMP is too broad a category to be used without further specification, and it develops a typology of four different types of ALMPs: incentive reinforcement, employment assistance, occupation, and human capital investment. These are discussed and examined through ALMP expenditure profiles in selected countries. The article uses this typology to analyze ALMP trajectories in six Western European countries and shows that the role of this instrument changes dramatically over time. It concludes that there is little regularity in the political determinants of ALMPs. In contrast, it finds strong institutional and ideational effects, nested in the interaction between the changing economic context and existing labor-market policies.