published in: Regional Science and Urban Economics, 2006, 36 (3), 399-430
Each year Germany and many other developed economies spend tens of billions of Euros on
active measures of employment promotion with the explicit aim of contributing to the
reduction of unemployment. Yet, high unemployment has universally been a persistent
problem throughout the last two decades, raising the question as to the actual effect of the
measures of employment promotion. This paper contributes to the received literature by
investigating whether a specific strategy of active labor market policy measures can
contribute to a significant reduction of unemployment on the (semi-) aggregate level of the
local labor offices in Germany. To this end, we analyze ALMP in Germany in a spatially
augmented regression framework. Our results suggest that a policy strategy focusing on
monetary incentive schemes rather than on public employment programs is more successful.
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