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Composite indicator of German regional policy and its use for optimizing subsidies to regional labour markets

Ein zusammengesetzter Indikator für die deutsche Regionalpolitik und sein Nutzen für die Optimierung regionaler Arbeitsmarktpolitik
[working paper]

Tangian, Andranik S.

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Corporate Editor Wirtschafts- und Sozialwissenschaftliches Institut in der Hans-Böckler-Stiftung
Abstract "German structural policy is characterized by a composite indicator with three targets: (1) minimization of unemployment, (2) maximization of GDP, and (3) equalization of regional unemployment rates. The composite indicator with given target weights is maximized subject to budget constraints and some administrative restrictions. The optimal combinations of target indices obtained for variable weight ratios are to be considered by a policy maker who thereby makes the final choice among already optimized outcomes, not being burdened with adjusting the target weights. The optimization is performed for econometric predictions-2004 which are derived from regional data for 1994-2002. Comparing with the optimal budget distribution, the effciency of the actual 'manual' budget distribution in 2000-2002 is about 4 per cent, that is, the results actually obtained for 6 Bio. EUR could be obtained for 241 Mio.EUR (= 4 per cent of the actual budget). Such a bad implementation of active labour market policies can be responsible for their low efficiency reported in some empirical studies and misinterpreted as their uselessness. Besides, it is found that the most productive jobs (most contributing to GDP) require least subsidies. Finally, taxes expected from new jobs allow to consider the problem from a managerial viewpoint. In particular, the government can maximize tax returns from investments in labour market policies." (author's abstract)
Keywords index number; construction of indicators; regional policy; structural policy; employment policy; labor market policy; labor market; region; regional promotion of economy; European Structural Funds; unemployment; measure; economic growth; policy on income distribution; best practice; Federal Republic of Germany
Classification Area Development Planning, Regional Research; Labor Market Policy
Method applied research; empirical; quantitative empirical
Document language English
Publication Year 2005
City Düsseldorf
Page/Pages 46 p.
Series WSI-Diskussionspapier, 138
ISSN 1861-0633
Status Published Version
Licence Deposit Licence - No Redistribution, No Modifications
data provider This metadata entry was indexed by the Special Subject Collection Social Sciences, USB Cologne