CoPS/IMPACT Working Paper Number G-154

Title: The Displacement Effect of Labour-Market Programs: Estimates from the MONASH Model

Author: Peter B. Dixon and Maureen T. Rimmer


A key question concerning labour-market programs is the extent to which they generate jobs for their target group at the expense of others. This effect is measured by displacement percentages. We describe a version of the MONASH model designed to quantify the effects of labour-market programs. Our simulation results suggests that:

(1) labour-market programs can generate significant long-run increases in employment;

(2) displacement percentages depend on how a labour-market program affects the income trade-off faced by target and non-target groups between work and non-work; and

(3) displacement percentages are larger in the short run than in the long run.

JEL classification: C68, J23, J63

Keywords: labour-market programs, displacement percentage, CGE modelling.

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