The Effects of Expenditures for Labour Market Policy on Unemployment Rate

Background: Labour market policy aims to fight against unemployment and to raise employment. With this study we attempt to contribute to the evidence of the effectiveness of active labour market policy. Objectives: In the empirical part of the paper we aim to research the relations between the labour market policies and macroeconomic variables. Methods/Approach: In order to distinguish the effects of expenditures for labour market policies on unemployment rate, we separately analysed the effects of expenditures for active labour market policies and the effects of expenditures for passive labour market policies on unemployment rate using panel regression analysis. Results: The expenditures for active labour market policies have negative and statistically significant effect on unemployment rate, whereas the expenditures for passive labour market policies have positive and statistically significant effect on unemployment rate. Conclusions: Not only the activation strategies with benefit conditioning, but also encouraging and enabling unemployed person to actively approach in searching for a job should be implemented. The implementation of activation strategies which create favourable conditions for unemployed people to develop their skills, fulfil their potential, continuously maintain contacts with the employers and actively participate in the society should be supported.