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Do Wages Subsidies Increase Employment in Subsidised Firms?

Aki Kangasharju ()

No 378, Discussion Papers from VATT Institute for Economic Research

Abstract: The present paper examines whether subsidised jobs have contributed to the employment in subsidised firms or merely substituted for non-subsidised ones. The data set is an unbalanced panel of some 31,000 firms that are followed annually between 1995 and 2002. The analysis is based on difference-in-differences, which is adjusted by regression and matching methods. The results indicate that wage subsidies stimulate employment, and the magnitude of the effect is as aimed. It is also found that subsidies have no sizable effects on non-subsidised firms of the industry or geographical area in question.

Keywords: Evaluation, employment, wage subsidies, Macroeconomic policy, Talouspolitiikka, Labour market, Työmarkkinat, Taxation, Verotus, Effectiveness of public services, Julkisten palvelujen vaikuttavuus, J180 - Demographic Economics: Public Policy, J230 - Employment Determination; Job Creation; Demand for Labor; Self-Employment, J380 - Wages, Compensation, and Labor Costs: Public Policy (wage subsidies, minimum wage legislation), (search for similar items in EconPapers)
Date: 2005
New Economics Papers: this item is included in nep-lab
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Journal Article: Do Wage Subsidies Increase Employment in Subsidized Firms? (2007) Downloads
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