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Subsidizing Domestic Services as a Tool to Fight Unemployment: Effectiveness and Hidden Costs

Elisabeth Leduc () and Ilan Tojerow ()
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Elisabeth Leduc: Free University of Brussels

No 13544, IZA Discussion Papers from Institute of Labor Economics (IZA)

Abstract: European countries have increasingly adopted wage subsidies for the sector of domestic services to reduce low-skilled unemployment. Yet, empirical evidence on their effectiveness is scarce. In this paper, we use Belgian administrative data to estimate how participation in the subsidized domestic services sector impacts the labour market outcomes of program participants. Our identification strategy rests on a dynamic event study difference-in-differences model combined with coarsened exact matching. Our findings indicate that such subsidies can be effective in reducing unemployment and inactivity, but only by increasing employment within the subsidized domestic services sector. We also find that program participation deteriorates physical health, thus increasing the worker's probability of claiming disability insurance benefits.

Keywords: wage subsidies; low-skilled workers; unemployment; disability; domestic services; personal and household services; female employment (search for similar items in EconPapers)
JEL-codes: J08 J24 J28 J38 (search for similar items in EconPapers)
Pages: 62 pages
Date: 2020-07
New Economics Papers: this item is included in nep-eur, nep-hea and nep-lma
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