Leiden University Student Repository

Luijken, Maks (2023)

Labour on the Move: Exploring the Relationship between Cross-Border Trade and Active Labour Market Policies in Technologically Developed Countries: A Cross-Sectional Analysis of Active Labour Market Policies

Bachelor thesis | Bestuurskunde (BSc)

This research examines the impact of cross-border trade on active labour market programs (ALMPs) in European Union (EU) member states from 2004 to 2019. The increased economic integration in the EU has led to challenges in implementing effective ALMPs as workers, firms, and capital have become more mobile and less limited by national borders. Policymakers must understand how ALMPs react to this process to make effective policy choices. Furthermore, this research explores three theories that examine the impact of cross-border trade on ALMPs: the Heckscher-Ohlin model, which focuses on comparative advantages; the endogenous growth theory, which emphasises increased market access; and the human capital theory, which highlights the importance of investing in human capital for economic growth. Based on these three perspectives, the paper hypothesises that cross-border trade did affect active labour market policies in European Union member states from 2004 to 2019. Moreover, the findings...Show moreThis research examines the impact of cross-border trade on active labour market programs (ALMPs) in European Union (EU) member states from 2004 to 2019. The increased economic integration in the EU has led to challenges in implementing effective ALMPs as workers, firms, and capital have become more mobile and less limited by national borders. Policymakers must understand how ALMPs react to this process to make effective policy choices. Furthermore, this research explores three theories that examine the impact of cross-border trade on ALMPs: the Heckscher-Ohlin model, which focuses on comparative advantages; the endogenous growth theory, which emphasises increased market access; and the human capital theory, which highlights the importance of investing in human capital for economic growth. Based on these three perspectives, the paper hypothesises that cross-border trade did affect active labour market policies in European Union member states from 2004 to 2019. Moreover, the findings on the relationship between ALMPs and cross-border trade suggest that cross-border trade has a significant negative large impact on ALMP expenditure in highly technologically developed countries. Next to that, export and import negatively impact ALMP expenditure, but economic openness in the import-only regression positively affects ALMP spending, aligning with the endogenous growth theory. The overall negative effect stems from technology replacing human capital investment due to reduced demand for moderately skilled workers, and increased mobility may cause spill-over issues as workers migrate to countries with more generous ALMPs. Examining the relationship between cross-border trade and ALMP expenditure sub-variables in highly technologically developed countries, a significant negative relationship with employment incentives, supported employment and rehabilitation, and direct job creation expenditures is found. However, this effect is minimal. To conclude, utilising panel data regressions and theories like the HO model, endogenous growth theory, and human capital theory, the findings indicate that countries with higher cross-border trade levels are expected to spend less on ALMPs, contrary to theoretical expectations. Although the difference is small, it is essential for policy decisions, as it highlights potential spill-over problems due to increased mobility from open borders. The research offers valuable insights into the relationship between cross-border trade and ALMPs for policymakers and academics.Show less

Author

Luijken, Maks

Faculty

Faculty of Governance and Global Affairs

Specialisation

Economie, Bestuur & Management

Supervisors

Diris, R.E.M.

ECTS Credits

10

Language

en