wage offers (Schmieder et al. 2016) and in France it had no discernible impact on subsequent match quality or wages (Le Barbanchon 2016).<sup>4</sup>

# **2.2. ALMP and labor market outcomes**

The theoretical underpinnings of ALMP are multifaceted, as they encompass a wide range of programs and their effects cut through several economic and social areas. The main objective of ALMP is to increase labor supply and demand and improve labor market matching; however, they also have effects on productivity, output, poverty, inequality, and social cohesion, among others. PES programs are the most commonly used ALMP globally, which include the provision of vacancy database and labor market information, training programs, job search assistance, job placement, internship programs, wage subsidies, public works, and national training funds (Andersen et al. 2015). In countries that have UB schemes, ALMP are also used as a condition to receive UB to prevent moral hazard. Therefore, both the design and implementation of ALMP play a critical role in their success, as well as the institutional, economic, and socioeconomic environments of their respective countries.

Channels through which ALMP affect economic and social outcomes are covered widely in the literature. They help unemployed individuals find work by identifying their individual needs and goals through counseling; increasing their skill sets through training and on the job learning; facilitating job matching, and increasing competition. By enabling job seekers to develop human and social capital, they can also increase social inclusion and the productivity, output, and competitiveness of the labor force (Boone and Van Ours 2004; Calmfors 1995). However, ALMP can also have a negative impact on labor markets and the overall welfare of the economy if the jobs created by one program replace other jobs (displacement effect) or if they lead to the substitution of jobs in other sectors by changing the cost of wages through subsidies. Moreover, they may result in deadweight loss when the jobs they generate would have occurred naturally without any intervention and can lead to a lock-in effect, exacerbating unemployment (Calmfors 1995; Brown and Koettl 2015).

The vast majority of studies evaluating the impact of ALMP focus on micro-level analysis. They primarily concentrate on assessing how a specific ALMP program influences the employment opportunities of its participants within a defined timeframe. However, these studies often overlook the broader effects on non-participants and different sectors of the economy, as well as the associated costs of these programs. In a limited number of macro studies, Graversen and Van Ours (2008) revealed that in Denmark frequent interactions between the unemployed and PES reduced the duration of unemployment among participants and increased their likelihood of securing employment. Additionally, Pignatti and Van Belle (2018) demonstrated contrasting patterns between developed and developing economies: in developing countries, increased public expenditure on ALMP was associated with lower unemployment and higher

> 4 The empirical literature offers clear evidence on the impact of UB on social inclusion. O’Campo et al. (2015) suggest that UB above a certain threshold reduce poverty levels among unemployed workers but UB amounts that are too low have little effect. Benefits below the minimum wage level discourage application for UB. UB is frequently used during economic crises, including the Covid-19 pandemic, to protect vulnerable groups. Many governments expanded UB significantly during the pandemic (Gentilini et al. 2022; World Bank 2021; Ganong et al. 2021).

7