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Do Long-Term Unemployed Workers Benefit from Targeted Wage Subsidies?

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  • Benjamin Schünemann
  • Michael Lechner
  • Conny Wunsch

Abstract

type="main" xml:id="geer12040-abs-0001"> We evaluate a wage subsidy program that is targeted at long-term unemployed workers in Germany. We use an alternative identification procedure compared to empirical studies conducted so far. Exploiting the particular program regulations and large administrative data we estimate the impact of program availability using a regression discontinuity framework. Our results suggest no significant impact of the availability of the subsidy on labor market outcomes of the target group. Even though our analysis lacks some statistical power, our findings do not support the substantial positive effects obtained from matching studies. As our approach does not require observability of all drivers of selection, previous empirical studies justifying government expenditures on wage subsidies based on matching methods should be reconsidered.

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  • Benjamin Schünemann & Michael Lechner & Conny Wunsch, 2015. "Do Long-Term Unemployed Workers Benefit from Targeted Wage Subsidies?," German Economic Review, Verein für Socialpolitik, vol. 16(1), pages 43-64, February.
    • Handle: RePEc:bla:germec:v:16:y:2015:i:1:p:43-64
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    Cited by:

    1. Nikolay Angelov & Marcus Eliason, 2018. "Wage subsidies targeted to jobseekers with disabilities: subsequent employment and disability retirement," IZA Journal of Labor Policy, Springer;Forschungsinstitut zur Zukunft der Arbeit GmbH (IZA), vol. 7(1), pages 1-37, December.
    2. Lechner, Michael & Scioch, Patrycja & Wunsch, Conny, 2013. "Do Firms Benefit from Active Labour Market Policies?," Working papers 2013/11, Faculty of Business and Economics - University of Basel.
    3. Alic BÎRCA, 2023. "Workforce Participation in Active Labour Market Policies: A Comparative Analysis in EU Member States," REVISTA DE MANAGEMENT COMPARAT INTERNATIONAL/REVIEW OF INTERNATIONAL COMPARATIVE MANAGEMENT, Faculty of Management, Academy of Economic Studies, Bucharest, Romania, vol. 24(2), pages 173-187, May.
    4. Caliendo, Marco & Mahlstedt, Robert & Mitnik, Oscar A., 2017. "Unobservable, but unimportant? The relevance of usually unobserved variables for the evaluation of labor market policies," Labour Economics, Elsevier, vol. 46(C), pages 14-25.
    5. Andrea Albanese & Bart Cockx & Muriel Dejemeppe, 2022. "Long-Term Effects of Hiring Subsidies for Unemployed Youths - Beware of Spillovers," LISER Working Paper Series 2022-09, Luxembourg Institute of Socio-Economic Research (LISER).
    6. Antonia Asenjo & Verónica Escudero & Hannah Liepmann, 2024. "Why Should we Integrate Income and Employment Support? A Conceptual and Empirical Investigation," Journal of Development Studies, Taylor & Francis Journals, vol. 60(1), pages 1-29, January.
    7. Pasquini, Alessandra & Centra, Marco & Pellegrini, Guido, 2019. "Fighting long-term unemployment: Do we have the whole picture?," Labour Economics, Elsevier, vol. 61(C).
    8. Jeff Borland, 2016. "Wage Subsidy Programs: A Primer," Australian Journal of Labour Economics (AJLE), Bankwest Curtin Economics Centre (BCEC), Curtin Business School, vol. 19(3), pages 131-144.
    9. Sam Desiere & Bart Cockx, 2021. "How Effective Are Hiring Subsidies to Reduce Long-Term Unemployment among Prime-Aged Jobseekers? Evidence from Belgium," CESifo Working Paper Series 9325, CESifo.
    10. Kunze, Astrid & Palczyńska, Marta & Magda, Iga, 2023. "The Employment Effects of a Wage Subsidy for the Young during an Economic Recovery," IZA Discussion Papers 16196, Institute of Labor Economics (IZA).
    11. Albanese, Andrea & Cockx, B. & Dejemeppe, Muriel, 2023. "Long-term effects of hiring subsidies for low-educated unemployed youths," ROA Research Memorandum 002, Maastricht University, Research Centre for Education and the Labour Market (ROA).
    12. Moczall, Andreas, 2015. "The effect of hiring subsidies on regular wages," IAB-Discussion Paper 201501, Institut für Arbeitsmarkt- und Berufsforschung (IAB), Nürnberg [Institute for Employment Research, Nuremberg, Germany].
    13. Joachim Wolff & Gesine Stephan, 2013. "Subsidized work before and after the German Hartz reforms: design of major schemes, evaluation results and lessons learnt," IZA Journal of Labor Policy, Springer;Forschungsinstitut zur Zukunft der Arbeit GmbH (IZA), vol. 2(1), pages 1-24, December.
    14. Rainer Eppel & Helmut Mahringer, 2012. "Do wage subsidies work in boosting economic inclusion? Evidence on e," EcoMod2012 4065, EcoMod.
    15. Moczall, Andreas, 2015. "The effect of hiring subsidies on regular wages," VfS Annual Conference 2015 (Muenster): Economic Development - Theory and Policy 113225, Verein für Socialpolitik / German Economic Association.
    16. Vom Berge, Philipp & Klingert, Isabell & Becker, Sebastian & Lenhart, Julia & Trenkle, Simon & Umkehrer, Matthias, 2016. "Mindestlohnbegleitforschung - Überprüfung der Ausnahmeregelung für Langzeitarbeitslose : Forschungsauftrag des Bundesministeriums für Arbeit und Soziales (BMAS)," IAB-Forschungsbericht 201608, Institut für Arbeitsmarkt- und Berufsforschung (IAB), Nürnberg [Institute for Employment Research, Nuremberg, Germany].
    17. Rainer Eppel & Helmut Mahringer, 2013. "Do Wage Subsidies Work in Boosting Economic Inclusion? Evidence on Effect Heterogeneity in Austria," WIFO Working Papers 456, WIFO.
    18. Deuchert, Eva & Kauer, Lukas, 2013. "Hiring subsidies for people with a disability: Helping or hindering? - Evidence from a small scale social field experiment," Economics Working Paper Series 1335, University of St. Gallen, School of Economics and Political Science.
    19. Sjögren, Anna & Vikström, Johan, 2015. "How long and how much? Learning about the design of wage subsidies from policy changes and discontinuities," Labour Economics, Elsevier, vol. 34(C), pages 127-137.
    20. Michael Weber, 2016. "The short-run and long-run effects of decentralizing public employment services," ifo Working Paper Series 209, ifo Institute - Leibniz Institute for Economic Research at the University of Munich.
    21. Angelov, Nikolay & Eliason, Marcus, 2014. "The effects of targeted labour market programs for job seekers with occupational disabilities," Working Paper Series 2014:27, IFAU - Institute for Evaluation of Labour Market and Education Policy.

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    JEL classification:

    • J08 - Labor and Demographic Economics - - General - - - Labor Economics Policies
    • J23 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Labor Demand

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