Active labor market programs employment gain or fiscal drain?

This paper provides a new perspective in classifying ALMPs depending on their main objective, also in light of their relevance and cost-effectiveness during normal times, during a crisis, and during recovery. We distinguish ALMPs that provide incentives for retaining employment, incentives for creating employment, incentives for seeking and keeping a job, incentives for human capital enhancement, and improved labor market matching. We will discuss their direct and indirect effects determining their cost- effectiveness as well as to provide examples which may provide lessons to learn for transition and developing countries. This paper provides a systematic overview of how, why, when and to what extent specific policies are effective.