Do Earnings Subsidies Affect Job Choice?

Helen Connolly () and Peter Gottschalk

No 1322, IZA Discussion Papers from Institute of Labor Economics (IZA)

Abstract: It is widely acknowledged that tax and transfer policies can affect employment. This paper explores a different potential impact of transfer policy by asking whether subsidies also affect job duration and wage growth. We provide an analytical framework that identifies causal links between earnings subsidies, job turnover, and wage growth. This framework highlights the importance of the form of the subsidy on the decision about the type of job to accept and, hence, its potential effect on within-job wage growth. The subsidy is predicted to increase job turnover and to affect between-job wage growth by affecting reservation wages. We use this framework to analyze the effects of the Canadian Self-Sufficiency Project (SSP). Consistent with the predictions of the analytical framework, we find that experimentals have shorter job duration and experience faster wage growth than the controls, who continue to be eligible only for Income Assistance.

Keywords: wage subsidy; job choice (search for similar items in EconPapers)
JEL-codes: J23 J38 (search for similar items in EconPapers)
Pages: 31 pages
Date: 2004-09
New Economics Papers: this item is included in nep-bec, nep-lab and nep-ltv
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (8)

Published - published as 'Do earnings subsidies affect job choice? The impact of SSP subsidies on job turnover and wage growth' in: Canadian Journal of Economics / Revue canadienne d'économique, 2009, 42 (4), 1276 - 1304

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