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Do wage subsidies Enhance Employability? Evidence from Australian Youth

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  • J Richardson
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    Abstract

    We examine a panel of unemployed Australian youth to investigate whether participation in a wage subsidy programme offers merely a temporary respite from unemployment, or whether there are longer-lasting positive employability effects. Controlling for selection bias using a bivariate probit analysis, we estimate the effect of participation in the Special Youth Employment Training Program on the probability of being employed in subsequent waves of the data, up to an average of 26 months after subsidy expiry. We find that far from breaking up when support expires, subsidies extend short duration jobs. Furthermore, we find large and significant effects of participation on the subsequent employability. Much of this arises from retention of subsidised jobs, but even excluding this we find evidence of longer-term positive effects.

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    File URL: http://cep.lse.ac.uk/pubs/download/DP0387.pdf
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    Bibliographic Info

    Paper provided by Centre for Economic Performance, LSE in its series CEP Discussion Papers with number dp0387.

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    Date of creation: Apr 1998
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    Handle: RePEc:cep:cepdps:dp0387

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    Web page: http://cep.lse.ac.uk/_new/publications/series.asp?prog=CEP

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    1. O'Higgins, Niall, 1994. "YTS, Employment, and Sample Selection Bias," Oxford Economic Papers, Oxford University Press, vol. 46(4), pages 605-28, October.
    2. Stretton, A. & Chapman, B.J., 1990. "An Analysis of Australian Labour Market Programs," CEPR Discussion Papers 247, Centre for Economic Policy Research, Research School of Economics, Australian National University.
    3. Zweimuller, Josef & Winter- Ebmer, Rudolf, 1992. "Manpower Training Programs and Employment Stability," Institute for Research on Labor and Employment, Working Paper Series qt87z0674q, Institute of Industrial Relations, UC Berkeley.
    4. J Richardson, 1997. "Wage Subsidies for the Long Term Unemployed: A Search Theoretic Analysis," CEP Discussion Papers dp0347, Centre for Economic Performance, LSE.
    5. Pissarides, Christopher A, 1992. "Loss of Skill during Unemployment and the Persistence of Employment Shocks," The Quarterly Journal of Economics, MIT Press, vol. 107(4), pages 1371-91, November.
    6. Bruce Chapman, 1985. "Continuity and Change: Labour Market Programs and Education Expenditure," Australian Economic Review, The University of Melbourne, Melbourne Institute of Applied Economic and Social Research, vol. 18(3), pages 98-112.
    7. Couch, Kenneth A, 1992. "New Evidence on the Long-Term Effects of Employment Training Programs," Journal of Labor Economics, University of Chicago Press, vol. 10(4), pages 380-88, October.
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    Cited by:
    1. Aki Kangasharju, 2005. "Do Wages Subsidies Increase Employment in Subsidised Firms?," Discussion Papers 378, Government Institute for Economic Research Finland (VATT).

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