Labour Market Policies in Times of Crisis: A Comparison of the 1992-1993 and 2008-2010 Recessions

This article examines the reaction function of labour market expenditure to the economic cycle and especially to the labour market situation in 24 OECD countries, over the period 1985 to 2010. The level of public debt is also introduced as a potential determinant of labour market policy expenditures. Using a fixed effect model with interacting terms, it focuses on two periods of crisis (1992-1993 and 2007-2009). The results indicate that the level of reactivity of labour market expenditure did in general decrease between the early 1990s and the 2008 downturn. This could result from important reforms in this field, over the last 20 years.