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

András Svraka

MPRA Paper from University Library of Munich, Germany

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)
New Economics Papers: this item is included in nep-eur, nep-lma and nep-tra
Date: 2018-08-02
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Persistent link: https://EconPapers.repec.org/RePEc:pra:mprapa:88234

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