The effect of hiring subsidies on regular wages

Andreas Moczall

VfS Annual Conference 2015 (Muenster): Economic Development - Theory and Policy from Verein für Socialpolitik / German Economic Association

Abstract: What happens to the wages of regular workers in establishments subsidized with hiring subsidies? Does hiring programme participants result in windfalls that are dis-tributed among regular workers? Do these reduce their wage demands to avoid be-ing substituted by subsidized workers? Using linked employer-employee data from Germany, I estimate the effects of subsidizing an establishment on regular workers' wages using spell fixed effects regression. I find that hiring subsidy schemes do increase the daily wages of regular workers by up to almost one per cent in the manufacturing sector. These effects are limited to large establishments and above-median local unemployment rates. They occur within the establishment itself and are not merely the result of varying regional exposure to ALMP programmes. I conclude that hiring subsidies have a notable impact on regular workers beyond mere substitution.

JEL-codes: C23 H25 J38 (search for similar items in EconPapers)
Date: 2015
New Economics Papers: this item is included in nep-eur and nep-ure
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Citations: View citations in EconPapers (6)

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