Advanced Search
MyIDEAS: Login to save this article or follow this journal

Comparing the effectiveness of employment subsidies

Contents:

Author Info

  • Brown, Alessio J.G.
  • Merkl, Christian
  • Snower, Dennis J.

Abstract

This paper examines the implications of different types of employment subsidies for employment, welfare, and inequality. It investigates how these effects depend on what target groups the subsidies address. Our analysis focuses on policies that are "approximately welfare efficient" (AWE), i.e. policies that (a) improve employment and welfare, (b) do not raise earnings inequality and (c) are self-financing. We construct a microfounded, dynamic model of hiring and separations and calibrate it with German data. The calibration shows that hiring vouchers can be AWE, while low-wage subsidies are not AWE. Furthermore, hiring vouchers targeted at the long-term unemployed are more effective than those targeted at low-ability workers.

Download Info

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
File URL: http://www.sciencedirect.com/science/article/B6VFD-51FXR59-1/2/d7cd6c0553cd720aa7031f3f47ef0a35
Download Restriction: Full text for ScienceDirect subscribers only

As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.

Bibliographic Info

Article provided by Elsevier in its journal Labour Economics.

Volume (Year): 18 (2011)
Issue (Month): 2 (April)
Pages: 168-179

as in new window
Handle: RePEc:eee:labeco:v:18:y:2011:i:2:p:168-179

Contact details of provider:
Web page: http://www.elsevier.com/locate/labeco

Related research

Keywords: Low wage subsidy Hiring voucher Targeting Employment Unemployment Duration Self-financing;

Other versions of this item:

Find related papers by JEL classification:

References

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
as in new window
  1. A. Lans Bovenberg & Johan J. Graafland & Ruud A. de Mooij, 1998. "Tax Reform and the Dutch Labor Market: An Applied General Equilibrium Approach," NBER Working Papers 6693, National Bureau of Economic Research, Inc.
  2. Lechthaler, Wolfgang & Merkl, Christian & Snower, Dennis J., 2010. "Monetary Persistence and the Labor Market: A New Perspective," CEPR Discussion Papers 7650, C.E.P.R. Discussion Papers.
  3. Dennis J. Snower & Christian Merkl, 2006. "The Caring Hand that Cripples: The East German Labor Market after Reunification," American Economic Review, American Economic Association, vol. 96(2), pages 375-382, May.
  4. Orszag, Mike & Snower, Dennis J., 1997. "Youth Unemployment and Government Policy," CEPR Discussion Papers 1675, C.E.P.R. Discussion Papers.
  5. Hermann Gartner & Christian Merkl & Thomas Rothe, 2009. "They Are Even Larger! More (on) Puzzling Labor Market Volatilities," Kiel Working Papers 1545, Kiel Institute for the World Economy.
  6. Yu-Fu Chen & Michael Funke, 2005. "Non-Wage Labour Costs, Policy Uncertainty And Labour Demand - A Theoretical Assessment," Scottish Journal of Political Economy, Scottish Economic Society, vol. 52(5), pages 687-709, November.
  7. Robert E. Hall & Paul R. Milgrom, 2007. "The Limited Influence of Unemployment on the Wage Bargain," Levine's Bibliography 321307000000000135, UCLA Department of Economics.
  8. Warren, Ronald Jr., 1996. "Returns to scale in a matching model of the labor market," Economics Letters, Elsevier, vol. 50(1), pages 135-142, January.
  9. Garloff, Alfred & Fitzenberger, Bernd & Kohn, Karsten, 2003. "Beschäftigung und Lohnstrukturen nach Qualifikationen und Altersgruppen: Eine empirische Analyse auf Basis der IAB-Beschäftigtenstichprobe," ZEW Discussion Papers 03-75, ZEW - Zentrum für Europäische Wirtschaftsforschung / Center for European Economic Research.
  10. Sunde, Uwe & Thalmaier, Anja & Zimmermann, Klaus F., 1999. "Arbeitsplätze für Geringqualifizierte," Wirtschaftsdienst – Zeitschrift für Wirtschaftspolitik (1998 - 2007), ZBW – German National Library of Economics / Leibniz Information Centre for Economics, vol. 79(12), pages 723-730.
  11. Dennis J. Snower & Christian Merkl, 2006. "The Caring Hand that Cripples: The East German Labor Market After Reunification (Detailed Version)," Kiel Working Papers 1263, Kiel Institute for the World Economy.
  12. Christopher A. Pissarides, 2000. "Equilibrium Unemployment Theory, 2nd Edition," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262161877, December.
  13. J. Michael Orszag & Dennis J. Shower, 2000. "The Effectiveness of Employment Vouchers: A Simple Approach," German Economic Review, Verein für Socialpolitik, vol. 1(4), pages 385-419, November.
  14. Kremer, M & Maskin, E, 1996. "Wage Inequality and Segregation by Skill," Working papers 96-23, Massachusetts Institute of Technology (MIT), Department of Economics.
  15. Fahr, René & Sunde, Uwe, 2001. "Disaggregate Matching Functions," IZA Discussion Papers 335, Institute for the Study of Labor (IZA).
  16. Yu-Fu Chen & Michael Funke, 2003. "Labour Demand in Germany: An Assessment of Non-Wage Labour Costs," CESifo Working Paper Series 952, CESifo Group Munich.
  17. Lars Ljungqvist & Thomas J. Sargent, 1995. "The European unemployment dilemma," Working Paper Series, Macroeconomic Issues 95-17, Federal Reserve Bank of Chicago.
  18. Mortensen, Dale T & Pissarides, Christopher A, 1994. "Job Creation and Job Destruction in the Theory of Unemployment," Review of Economic Studies, Wiley Blackwell, vol. 61(3), pages 397-415, July.
  19. Frank Oskamp & Dennis J. Snower, 2006. "The Effect of Low-Wage Subsidies on Skills and Employment," Kiel Working Papers 1292, Kiel Institute for the World Economy.
  20. Brian Bell & Richard Blundell & John Reenen, 1999. "Getting the Unemployed Back to Work: The Role of Targeted Wage Subsidies," International Tax and Public Finance, Springer, vol. 6(3), pages 339-360, August.
  21. repec:ces:ifosdt:v::y:2006:i::p:06-27 is not listed on IDEAS
  22. Gabriele Cardullo & Bruno Van der Linden, 2007. "Employment Subsidies and Substitutable Skills: An Equilibrium Matching Approach," Applied Economics Quarterly (formerly: Konjunkturpolitik), Duncker & Humblot, Berlin, vol. 53(4), pages 375-404.
  23. Alfred Boss, 2006. "Brauchen wir einen Kombilohn?," Kiel Working Papers 1279, Kiel Institute for the World Economy.
  24. Michael P. Keane & Kenneth I. Wolpin, 1995. "The career decisions of young men," Working Papers 559, Federal Reserve Bank of Minneapolis.
  25. Brown, Alessio J G & Merkl, Christian & Snower, Dennis J., 2009. "An Incentive Theory of Matching," CEPR Discussion Papers 7283, C.E.P.R. Discussion Papers.
  26. David Coe & Dennis Snower, 1996. "Policy Complementarities: The Case for Fundamental Labor Market Reform," Archive Discussion Papers 9625, Birkbeck, Department of Economics, Mathematics & Statistics.
  27. Saint-Paul, Gilles, 1994. "Some Political Aspects of Unemployment," CEPR Discussion Papers 949, C.E.P.R. Discussion Papers.
  28. Fahr, René & Sunde, Uwe, 2004. "Occupational job creation: Patterns and implications," Munich Reprints in Economics 20488, University of Munich, Department of Economics.
  29. Dale T Mortensen & Christopher Pissarides, 2001. "Taxes, subsidies and equilibrium labor market outcomes," LSE Research Online Documents on Economics 2075, London School of Economics and Political Science, LSE Library.
  30. Uwe Jirjahn & Christian Pfeifer & Georgi Tsertsvadze, 2009. "Mikroökonomische Beschäftigungseffekte des Hamburger Modells zur Beschäftigungsförderung - Evaluation eines Kombilohns," Schmollers Jahrbuch : Journal of Applied Social Science Studies / Zeitschrift für Wirtschafts- und Sozialwissenschaften, Duncker & Humblot, Berlin, vol. 129(1), pages 37-82.
  31. Christopher J. O'Leary & Paul T. Decker & Stephen A. Wandner, 2003. "Cost-Effectiveness of Targeted Reemployment Bonuses," Upjohn Working Papers and Journal Articles 03-51, W.E. Upjohn Institute for Employment Research.
  32. Dickens, William T & Lang, Kevin, 1988. "The Reemergence of Segmented Labor Market Theory," American Economic Review, American Economic Association, vol. 78(2), pages 129-34, May.
  33. DREZE, Jacques H. & SNEESSENS, Henri, 1994. "Technical Development, Competition from Low-Wage Economies and Low-Skilled Unemployment," CORE Discussion Papers 1994036, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
  34. Lindbeck, Assar & Snower, Dennis J, 1987. "Strike and Lock-Out Threats and Fiscal Policy," Oxford Economic Papers, Oxford University Press, vol. 39(4), pages 760-84, December.
  35. Stephen A. Woodbury & Robert G. Spiegelman, . "Bonuses to Workers and Employers to Reduce unemployment: Randomized Trials in Illinois," Upjohn Working Papers and Journal Articles sawrgs1987, W.E. Upjohn Institute for Employment Research.
  36. repec:iab:iabzaf:v:43:i:1:p:53-71 is not listed on IDEAS
  37. Hui, Weng T. & Trivedi, P. K., 1986. "Duration dependence, targeted employment subsidies and unemployment benefits," Journal of Public Economics, Elsevier, vol. 31(1), pages 105-129, October.
  38. Oliver Jean Blanchard & Peter Diamond, 1989. "The Beveridge Curve," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 20(1), pages 1-76.
  39. Orszag, Jonathan Michael & Snower, Dennis J., 2000. "The effectiveness of employment vouchers : a simple approach," Open Access Publications from Kiel Institute for the World Economy 2519, Kiel Institute for the World Economy (IfW).
  40. Wienert, Helmut, 2006. "Einkommensdifferenzen zwischen Nicht-Akademikern und Akademikern," Wirtschaftsdienst – Zeitschrift für Wirtschaftspolitik (1998 - 2007), ZBW – German National Library of Economics / Leibniz Information Centre for Economics, vol. 86(2), pages 105-111.
  41. Paul Krugman, 1994. "Past and prospective causes of high unemployment," Economic Review, Federal Reserve Bank of Kansas City, issue Q IV, pages 23-43.
  42. Boone, Jan & van Ours, Jan C., 2004. "Effective Active Labor Market Policies," IZA Discussion Papers 1335, Institute for the Study of Labor (IZA).
  43. Robert Shimer, 2005. "The Cyclical Behavior of Equilibrium Unemployment and Vacancies," American Economic Review, American Economic Association, vol. 95(1), pages 25-49, March.
  44. Layard, Richard & Nickell, Stephen & Jackman, Richard, 1991. "Unemployment: Macroeconomic Performance and the Labour Market," OUP Catalogue, Oxford University Press, number 9780198284345, September.
  45. Richard B. Freeman, 1995. "Are Your Wages Set in Beijing?," Journal of Economic Perspectives, American Economic Association, vol. 9(3), pages 15-32, Summer.
  46. Ronald Bachmann, 2005. "Labour Market Dynamics in Germany: Hirings, Separations, and Job-to-Job Transitions over the Business Cycle," SFB 649 Discussion Papers SFB649DP2005-045, Sonderforschungsbereich 649, Humboldt University, Berlin, Germany.
  47. Orszag, Mike & Snower, Dennis J., 2002. "Unemployment Vouchers versus Low-Wage Subsidies," IZA Discussion Papers 537, Institute for the Study of Labor (IZA).
  48. René Fahr & Uwe Sunde, 2004. "Occupational job creation: patterns and implications," Oxford Economic Papers, Oxford University Press, vol. 56(3), pages 407-435, July.
  49. Wilke, Ralf A., 2004. "New Estimates of the Duration and Risk of Unemployment for West-Germany," ZEW Discussion Papers 04-26, ZEW - Zentrum für Europäische Wirtschaftsforschung / Center for European Economic Research.
  50. Hans-Werner Sinn & Christian Holzner & Wolfgang Meister & Wolfgang Ochel & Martin Werding, 2006. "Aktivierende Sozialhilfe 2006 - das Kombilohn-Modell des ifo Instituts," Ifo Schnelldienst, Ifo Institute for Economic Research at the University of Munich, vol. 59(02), pages 06-27, 01.
  51. Michael Kremer & Eric Maskin, 1996. "Wage Inequality and Segregation," Harvard Institute of Economic Research Working Papers 1777, Harvard - Institute of Economic Research.
  52. Lawrence F. Katz, 1996. "Wage Subsidies for the Disadvantaged," NBER Working Papers 5679, National Bureau of Economic Research, Inc.
  53. Bernd Fitzenberger & Alfred Garloff & Karsten Kohn, 2004. "Beschäftigung und Lohnstrukturen nach Qualifikationen und Altersgruppen : eine empirische Analyse auf der Basis der IAB- Beschäftigtenstichprobe," Working Papers of the Research Group Heterogenous Labor 04-01, Research Group Heterogeneous Labor, University of Konstanz/ZEW Mannheim.
  54. Snower, Dennis J., 1994. "Converting Unemployment Benefits into Employment Subsidies," CEPR Discussion Papers 930, C.E.P.R. Discussion Papers.
  55. Riphahn, Regina T. & Thalmaier, Anja & Zimmermann, Klaus F., 1999. "Report No. 2: Schaffung von Arbeitsplätzen für Geringqualifizierte," IZA Research Reports 2, Institute for the Study of Labor (IZA).
  56. Orszag, J. Michael & Snower, Dennis J., 2003. "Designing employment subsidies," Labour Economics, Elsevier, vol. 10(5), pages 557-572, October.
  57. Boone, J. & Ours, J.C. van, 2004. "Effective Labor Market Policies," Discussion Paper 2004-87, Tilburg University, Center for Economic Research.
  58. Phelps, Edmund S, 1994. "Low-Wage Employment Subsidies versus the Welfare State," American Economic Review, American Economic Association, vol. 84(2), pages 54-58, May.
  59. Gilles Saint Paul, 1998. "The political consequences of unemployment," Economics Working Papers 343, Department of Economics and Business, Universitat Pompeu Fabra.
Full references (including those not matched with items on IDEAS)

Citations

Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
as in new window

Cited by:
This item has more than 25 citations. To prevent cluttering this page, these citations are listed on a separate page.

Lists

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

Statistics

Access and download statistics

Corrections

When requesting a correction, please mention this item's handle: RePEc:eee:labeco:v:18:y:2011:i:2:p:168-179. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Zhang, Lei).

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.