South African Journal of Economic and Management Sciences
On-line version ISSN 1015-8812
GUPTA, Rangan and DU TOIT, Charlotte B. Active versus passive policies of unemployment: Growth and public finance perspectives. S. Afr. j. econ. manag. sci. [online]. 2009, vol.12, n.1, pp. 1-10. ISSN 1015-8812.
This paper develops a general equilibrium endogenous growth model in an overlapping generations framework, and compares, in terms of economic growth, a passive unemployment policy (unemployment insurance) with an active unemployment policy (government expenditures targeted towards improving the job-finding probability of an unemployed). Besides, the standard result of unemployment being growth reducing, under realistic parameterisation, we show that the government, under an active policy, can generate higher growth without any compromise on its own consumption, when compared to the unemployment benefit regime. The result, however, depends crucially on the efficiency with which the resources are spent in creating employment.
Keywords : Active and passive policies of unemployment; unemployment benefits; endogenous growth.