The Regional Effects of Public Spending on Active Labor Market Policies: Evidence from Advanced Economies

Abstract

This paper examines the regional effects of public spending on Active Labor Market polices (ALMPs). Using an unbalanced sample of 308 regions belonging to 29 OECD Economies for the period 1995-2011, we show that discretionary increases in public spending on active labor market policies at the national level have statistically significant short- and medium-term effect in reducing regional unemployment rate, while raising regional output. These effects tend to be larger during periods of low GDP growth, and when complemented by a larger share of cohesion fund expenditures.