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The Effect of Labour Cost Reduction on Employment of Vulnerable Groups — Evaluation of the Hungarian Job Protection Act

András Svraka

Taxation Working Papers from Ministry of Finance, Department of Tax Policy and International Taxation

Abstract: In 2013 Hungary introduced large scale targeted employers' social security contribution cuts for the young, old, low-skilled, and other marginally attached workforce, called the Job Protection Act (JPA). In this paper I estimate the employment effects of the programme for the main target groups using the discontinuities in the JPA's design in a differences in differences framework on administrative datasources. My estimates show robust and economically significant employment effects for the JPA, a total 1.2% point increase in employment rate three years after the introduction. The JPA was highly effective in the young and low-skilled target groups, with high self-financing ratios, while it was only marginally effective in the old target group. The results suggests that targeted tax incentives can be a cost-efficient way of increasing employment in vulnerable groups.

Keywords: Job Protection Act; targeted tax incentives; differences in differences (search for similar items in EconPapers)
JEL-codes: H24 J21 J23 (search for similar items in EconPapers)
Date: 2018-08-02
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Published in Public Finance Quarterly, vol. 64(1), pages 72-92.

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Related works:
Journal Article: The Effect of Labour Cost Reduction on Employment of Vulnerable Groups (2019) Downloads
Working Paper: The Effect of Labour Cost Reduction on Employment of Vulnerable Groups — Evaluation of the Hungarian Job Protection Act (2018) Downloads
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Persistent link: https://EconPapers.repec.org/RePEc:auo:moftwp:4

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