Creating Low-Skilled Jobs by Subsidising Market-Contracted Household Work
AbstractWe analyse the determinants of household work contracted in the German shadow economy. The German socio-economic household panel, which enumerates casual domestic employment, is used to estimate the demand for such household work. The regressors include regional wage rates, household income and several control variables for household composition. We find that the demand for household work in the shadow economy is very income elastic. This suggests that targeted wage subsidies, linked to household work agencies, would be very effective in raising the legal demand for domestic help. A wage subsidy of 50% of wage costs could thus establish up to 500,000 new jobs for previously unemployed or non-working low skilled workers. The net fiscal costs of such a scheme are about 6.200 euro per full-time job. In addition, society benefits from more law enforcement and from an increased female labour supply, especially of highly qualified mothers.
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Bibliographic InfoPaper provided by C.E.P.R. Discussion Papers in its series CEPR Discussion Papers with number 4225.
Date of creation: Feb 2004
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Other versions of this item:
- Tilman Bruck & John P. Haisken-De New & Klaus Zimmermann, 2006. "Creating low skilled jobs by subsidizing market-contracted household work," Applied Economics, Taylor & Francis Journals, vol. 38(8), pages 899-911.
- Brück, Tilman & Haisken-DeNew, John P. & Zimmermann, Klaus F., 2003. "Creating Low Skilled Jobs by Subsidizing Market-Contracted Household Work," IZA Discussion Papers 958, Institute for the Study of Labor (IZA).
- Tilman Brück & John P. Haisken-DeNew & Klaus F. Zimmermann, 2003. "Creating Low Skilled Jobs by Subsidising Market-Contracted Household Work," Discussion Papers of DIW Berlin 387, DIW Berlin, German Institute for Economic Research.
- D13 - Microeconomics - - Household Behavior - - - Household Production and Intrahouse Allocation
- H24 - Public Economics - - Taxation, Subsidies, and Revenue - - - Personal Income and Other Nonbusiness Taxes and Subsidies
- J23 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Labor Demand
- K42 - Law and Economics - - Legal Procedure, the Legal System, and Illegal Behavior - - - Illegal Behavior and the Enforcement of Law
This paper has been announced in the following NEP Reports:
- NEP-ALL-2004-02-29 (All new papers)
- NEP-LAW-2004-02-29 (Law & Economics)
- NEP-PBE-2004-02-29 (Public Economics)
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