Labour market policies and unemployment in the OECD

Abstract

The massive increase in unemployment throughout the OECD since the early 1970s has led governments in many countries to introduce, or to expand, labour market policies. Such programmes have the objective of reducing unemployment by improving the workings of the labour market. After a description of these programmes, this article proposes a framework, based on the relationship between unemployment and vacancies within which the rise in unemployment can be analysed and the effects of policies and of institutions examined. This framework helps to identify the main factors which have affected the unemployment and vacancy rates in 14 of the main OECD countries over the period 1970-88. The main results are that while corporatism remains the institutional feature with the biggest single impact in sustaining low unemployment rates, labour market policies also have had a significant and well-defined effect on unemployment, which appears large relative to the budgetary costs of the programmes. -from Authors