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The Effectiveness of Employment Vouchers: A Simple Approach

Author

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  • Orszag J. Michael
  • Snower Dennis J.

    (Birkbeck College, London, United Kingdom of Great Britain and Northern Ireland)

Abstract

This paper explores the optimal design of subsidies for hiring unemployed workers (`employment vouchers' for short) in the context of a simple dynamic model of the labour market. Focusing on the short-term and long-term effects of the vouchers on employment and unemployment, the analysis shows how the optimal policy depends on the rates of hiring and firing, and on the problems of displacement and deadweight. It also examines the roles of the government budget constraint and of the level of unemployment benefits in optimal policy design. We calibrate the model and evaluate the effectiveness of employment vouchers in reducing unemployment for a wide range of feasible parameters.

Suggested Citation

  • Orszag J. Michael & Snower Dennis J., 2000. "The Effectiveness of Employment Vouchers: A Simple Approach," German Economic Review, De Gruyter, vol. 1(4), pages 385-419, December.
    • Handle: RePEc:bpj:germec:v:1:y:2000:i:4:p:385-419
    DOI: 10.1111/1468-0475.00019
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    Citations

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    Cited by:

    1. Brown, Alessio J.G. & Merkl, Christian & Snower, Dennis J., 2011. "Comparing the effectiveness of employment subsidies," Labour Economics, Elsevier, vol. 18(2), pages 168-179, April.
    2. Brown, Alessio J.G. & Orszag, J. Michael & Snower, Dennis J., 2008. "Unemployment accounts and employment incentives," European Journal of Political Economy, Elsevier, vol. 24(3), pages 587-604, September.
    3. Orszag, J. Michael & Snower, Dennis J., 2002. "Incapacity benefits and employment policy," Labour Economics, Elsevier, vol. 9(5), pages 631-641, November.

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