This thesis investigates labour market policies and the way they interact with labour market frictions. The first chapter of this thesis is dedicated to the introduction of a new method to measure skills mismatch in the labour market. By introducing a new index that uses employment distribution across sectors to measure labour demand and education distribution of unemployed workers, this new index reproduces some of the more relevant results in the literature. Given the nature of the index, the chapter can calculate it for as much as 74 countries per year. The results point to significant differences among men and women, and between high income and non high income countries. Chapter two studies the relationship between the business cycle and unemployment benefits policies. Using US states as case study, it deploys several tools in order to understand: (i) whether unemployment benefit policy variation across states are related with differences in states' business cycles; and (ii) in which direction such relationship might work. The results show that the maximum level of unemployment benefits is the main tool states can use to influence both the actual level of unemployment benefits received. Because of that, it is also the variable concerning the unemployment insurance scheme that co-moves with business cycle moments more often. The last section of the chapter provides evidence that in fact, policy decisions regarding unemployment benefits are influenced by business cycle moments. In particular, states where the labour market is more volatile implement lower maximum limits to unemployment benefits. The last chapter estimates the impact that policies that facilitate dismissal procedures have on unemployment flows in European Union member states. The results suggest that in the aftermath of the crisis, such policies lead to higher inflow rates into unemployment, without a discernible effect on outflow rates. Conversely, before the crisis the evidence produced in the chapter points to a significant positive effect in outflow rates from unemployment, without no clear/significant impact on inflow rates.