Do Targeted Hiring Subsidies and Profiling Techniques Reduce Unemployment?
AbstractTo reduce unemployment targeted hiring subsidies for long-term unemployed are often recommended. To explore their effect on employment and wages, we devise a model with two types of unemployed and two methods of search, a public employment service (PES) and random search. The eligibility of a new match depends on the applicant’s unemployment duration and on the method of search. The hiring subsidy raises job destruction and extends contrary to Mortensen-Pissarides (1999, 2003) the duration of a job search, so that equilibrium unemployment increases. Like the subsidy, organizational reforms, which advance the search effectiveness of the PES, crowd out the active jobseekers and reduce overall employment as well as social welfare. Nevertheless, reforms are a visible success for the PES and its target group, as they significantly increase the service’s placement rate and lower the duration of a job search via the PES
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Bibliographic InfoPaper provided by University of Aarhus, Aarhus School of Business, Department of Economics in its series Working Papers with number 08-19.
Length: 52 pages
Date of creation: 10 Oct 2008
Date of revision:
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More information through EDIRC
Matching model; hiring subsidy; endogenous separation rate; active labour market policy; PES; random search;
Other versions of this item:
- Jahn, Elke J. & Wagner, Thomas, 2008. "Do Targeted Hiring Subsidies and Profiling Techniques Reduce Unemployment?," IZA Discussion Papers 3768, Institute for the Study of Labor (IZA).
- J41 - Labor and Demographic Economics - - Particular Labor Markets - - - Labor Contracts
- J63 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Turnover; Vacancies; Layoffs
- J64 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Unemployment: Models, Duration, Incidence, and Job Search
- J68 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Public Policy
This paper has been announced in the following NEP Reports:
- NEP-ALL-2009-05-09 (All new papers)
- NEP-DGE-2009-05-09 (Dynamic General Equilibrium)
- NEP-LAB-2009-05-09 (Labour Economics)
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