Original Research

Active versus passive policies of unemployment: growth and public finance perspectives

Rangan Gupta, Charlotte Du Toit
South African Journal of Economic and Management Sciences | Vol 12, No 1 | a257 | DOI: https://doi.org/10.4102/sajems.v12i1.257 | © 2011 Rangan Gupta, Charlotte Du Toit | This work is licensed under CC Attribution 4.0
Submitted: 11 August 2011 | Published: 12 August 2011

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Rangan Gupta, University of Pretoria, South Africa
Charlotte Du Toit, University of South Africa

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Abstract

This paper develops a general equilibrium endogenous growth model in an overlapping generations framework, and compares, in terms of economic growth, a passive unemployment policy (unemployment insurance) with an active unemployment policy (government expenditures targeted towards improving the job-finding probability of an unemployed). Besides, the standard result of unemployment being growth reducing, under realistic parameterization, we show that the government, under an active policy, can generate higher growth without any compromise on its own consumption, when compared to the unemployment benefit regime. The result, however, depends crucially on the efficiency with which the resources are spent in creating employment. 

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Crossref Citations

1. The long-run impact of inflation in South Africa
Kafayat Amusa, Rangan Gupta, Shaakira Karolia, Beatrice D. Simo-Kengne
Journal of Policy Modeling  vol: 35  issue: 5  first page: 798  year: 2013  
doi: 10.1016/j.jpolmod.2011.05.001