Determinants of active labor market policy: A spatial and multilevel analysis of ALMP expenditures in 29 OECD countries between 1985 and 2010

Abstract

In recent years, a growing field of research, known as policy diffusion, has investigated the idea that policy choices affect each other across geographic units. However, the distinction between direct and indirect diffusion has to a large part been neglected. This thesis adds to the policy diffusion literature by distinguishing between direct and indirect diffusion of active labor market policy (ALMP). Hence, the analysis also contributes to the research focusing on explaining variation in ALMP. Using spatial and multilevel regression methods, the thesis investigates causes of diffusion and identifies the most important determinants of the variation in ALMP expenditures across 29 OECD countries, between 1985 and 2010. The empirical analysis finds evidence to support the argument that the spread of ALMP across countries is driven by domestic determinants and common contexts, and not by diffusion of the policy itself. Domestic institutional variables are found to be most influential in explaining geographic patterns of ALMP, more precisely social democratic welfare regime and corporatism. The same variables, in addition to the age of EU membership, are found to be responsible for explaining expenditure variation across countries in the period 1985-2010.