This paper provides a new perspective by classifying active labor market programs (ALMPs) depending on their objectives, relevance and cost-effectiveness during normal times, a crisis and recovery. We distinguish ALMPs providing incentives for retaining employment, incentives for creating employment, incentives for seeking and keeping a job, incentives for human capital enhancement and improved labor market matching. Reviewing evidence from the literature, we discuss especially indirect effects

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... of various interventions and their cost-effectiveness. The paper concludes by providing a systematic overview of how, why, when and to what extent specific ALMPs are effective. JEL classification: J08, J22, J23, J38, E24 Heavily advocated by the OECD, ALMPs are of growing interest and relevance due to increasing unemployment also for transition and developing countries. Governments have been responding to the crisis through active labor market programs (ALMPs) like subsidizing employment and providing training and employment services. The job crisis may have increased unemployment persistence, leading to longer unemployment spells, an increase in long-term unemployment and subsequently to skill attrition-thereby, also having detrimental effects on future employment probability 1 . At the same time, tighter budget constraints highlight the relevance of evidence-based, cost-effective active labor market policy making to support recoveries. This paper aims to bridge the gap between understanding cost-effective ALMPs and boosting post-crisis recoveries. At the same time, as pointed out by Cazes et al. (2009) and as witnessed by take-up rates of ALMPs, for example, in work sharing arrangements 2 , time lags until policies can be operational need to be taken into account. Thus, this calls for an existing ready-to-implement policy strategy based on existing evidence, which can be adapted to the respective position in the business cycle. This paper provides a new policy perspective in classifying ALMPs in light of their relevance and cost-effectiveness during normal times and recoveries to guide evidence-based policy making. We will discuss in particular the indirect effects, including macroeconomic and general equilibrium effects, as well as longer run effects determining the cost-effectiveness. We will also address the challenges for design and implementation in