Comparing the effectiveness of employment subsidies

Alessio Brown, Christian Merkl and Dennis J. Snower

Labour Economics, 2011, vol. 18, issue 2, 168-179

Abstract: This paper examines the implications of different types of employment subsidies for employment, welfare, and inequality. It investigates how these effects depend on what target groups the subsidies address. Our analysis focuses on policies that are "approximately welfare efficient" (AWE), i.e. policies that (a) improve employment and welfare, (b) do not raise earnings inequality and (c) are self-financing. We construct a microfounded, dynamic model of hiring and separations and calibrate it with German data. The calibration shows that hiring vouchers can be AWE, while low-wage subsidies are not AWE. Furthermore, hiring vouchers targeted at the long-term unemployed are more effective than those targeted at low-ability workers.

Keywords: Low; wage; subsidy; Hiring; voucher; Targeting; Employment; Unemployment; Duration; Self-financing (search for similar items in EconPapers)
Date: 2011
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Citations: View citations in EconPapers (27)

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Related works:
Working Paper: Comparing the effectiveness of employment subsidies (2010)
Working Paper: Comparing the Effectiveness of Employment Subsidies (2007)
Working Paper: Comparing the Effectiveness of Employment Subsidies (2007)
Working Paper: Comparing the effectiveness of employment subsidies (2006)
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Persistent link: https://EconPapers.repec.org/RePEc:eee:labeco:v:18:y:2011:i:2:p:168-179

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