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Fiscal stimuli in the form of job creation subsidies

Chun-Hung Kuo and Hiroaki Miyamoto

Journal of Macroeconomics, 2015, vol. 43, issue C, 267-284

Abstract: This paper examines the effects of fiscal stimuli in the form of job creation subsidies in a DSGE model with search friction and endogenous job separation. We consider two types of job creation subsidies: a subsidy for the cost of posting vacancies and a hiring subsidy. This paper finds that the effects of job creation subsides on unemployment differ between models with and without endogenous job separation. While a positive job creation subsidy shock lowers unemployment in a model without endogenous job separation, it increases unemployment in a model with endogenous job separation. We also find that while qualitatively the effects of a vacancy cost subsidy on the economy are similar to those of a hiring subsidy, quantitatively they are different.

Keywords: Fiscal policy; Hiring subsidy; Unemployment; Search and matching (search for similar items in EconPapers)
JEL-codes: E24 E62 J64 (search for similar items in EconPapers)
Date: 2015
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DOI: 10.1016/j.jmacro.2014.12.004

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