Written by: Trine Filges John Kennes, Birthe Larsen and Torben Tranæs

Active labour market programmes were introduced in most Western countries during the 1990s. This paper analyses the content of an optimal labour market policy in societies where individuals with differing levels of human capital can invest in education and training in order to increase their labour market productivity, and where the governments follow political goals targeting both equality and efficiency.

The paper is also published in the Journal of Macroeconomics Volume 33, Issue 4, December 2011