Comparing the Effectiveness of Employment Subsidies

Dennis Snower, Christian Merkl and Alessio Brown

No 6334, CEPR Discussion Papers from Centre for Economic Policy Research

Abstract: This paper analyses theoretically and empirically how employment subsidies should be targeted. We contrast measures involving targeting workers with low incomes/abilities and targeting the unemployed under the criteria of "approximate welfare efficiency" (AWE). Thereby we can identify 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 do not satisfy 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)
JEL-codes: J23 J24 J38 J64 J68 (search for similar items in EconPapers)
Date: 2007-06
New Economics Papers: this item is included in nep-lab
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (17)

Downloads: (external link)
https://cepr.org/publications/DP6334 (application/pdf)

Related works:
Journal Article: Comparing the effectiveness of employment subsidies (2011)
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 (2006)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:cpr:ceprdp:6334

Ordering information: This working paper can be ordered from
https://cepr.org/publications/DP6334

Access Statistics for this paper

More papers in CEPR Discussion Papers from Centre for Economic Policy Research 33 Great Sutton Street, London EC1V 0DX, UK.
Bibliographic data for series maintained by CEPR ().