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Getting the unemployed back to work: the role of targeted wage subsidies

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Author Info
Brian Bell
Richard Blundell () (Institute for Fiscal Studies and University College London)
John Van Reenen

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Abstract

This paper examines alternative approaches to wage subsidy programmes. It does this in the context of a recent active labour market reform for the young unemployed in Britain. This ÓŽew DealÔ reform and the characteristics of the target group are examined in detail. We discuss theoretical considerations, survey the existing empirical evidence and propose two strategies for evaluation. The first suggests an expost Ñ´rend adjusted diÄ¥rence in diÄ¥rence' estimator. The second, relates to a model based ex-ante evaluation. We present the conditions for each to provide a reliable evaluation and Å´ some of the crucial parameters using data from the British Labour Force Survey. We stress that the success of this type of labour market programmes hinge on dynamic aspects of the youth labour market, in particular the pay-off to experience and training.

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Paper provided by Institute for Fiscal Studies in its series IFS Working Papers with number W99/12.

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Length: 53 pp.
Date of creation: Apr 1999
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Handle: RePEc:ifs:ifsewp:99/12

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Find related papers by JEL classification:
H53 - Public Economics - - National Government Expenditures and Related Policies - - - Government Expenditures and Welfare Programs
J21 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Labor Force and Employment, Size, and Structure

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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.:
  1. Richard Blundell & Alan Duncan & Costas Meghir, 1995. "Estimating labour supply responses using tax reforms," IFS Working Papers W95/07, Institute for Fiscal Studies.
    Other versions:
  2. Meyer, Bruce D, 1990. "Unemployment Insurance and Unemployment Spells," Econometrica, Econometric Society, vol. 58(4), pages 757-82, July. [Downloadable!] (restricted)
    Other versions:
  3. Heckman, James J, 1979. "Sample Selection Bias as a Specification Error," Econometrica, Econometric Society, vol. 47(1), pages 153-61, January. [Downloadable!] (restricted)
  4. Orley Ashenfelter & David Card, 1984. "Using the Longitudinal Structure of Earnings to Estimate the Effect of Training Programs," NBER Working Papers 1489, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
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  5. David Card & Philip Robins, 1996. "Do Financial Incentives Encourage Welfare Recipients to Work? Early Findings from the Canadian Self Sufficiency Project," Working Papers 738, Princeton University, Department of Economics, Industrial Relations Section.. [Downloadable!]
  6. Katz, Lawrence F & Meyer, Bruce D, 1990. "Unemployment Insurance, Recall Expectations, and Unemployment Outcomes," The Quarterly Journal of Economics, MIT Press, vol. 105(4), pages 973-1002, November. [Downloadable!] (restricted)
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  7. LaLonde, Robert J, 1986. "Evaluating the Econometric Evaluations of Training Programs with Experimental Data," American Economic Review, American Economic Association, vol. 76(4), pages 604-20, September. [Downloadable!] (restricted)
  8. Bruce D. Meyer, 1995. "Lessons from the U.S. Unemployment Insurance Experiments," Journal of Economic Literature, American Economic Association, vol. 33(1), pages 91-131, March. [Downloadable!] (restricted)
  9. Gary Burtless, 1985. "Are targeted wage subsidies harmful? Evidence from a wage voucher experiment," Industrial and Labor Relations Review, ILR Review, ILR School, Cornell University, vol. 39(1), pages 105-114, October.
  10. Dolton, Peter & O'Neill, Donal, 1996. "Unemployment Duration and the Restart Effect: Some Experimental Evidence," Economic Journal, Royal Economic Society, vol. 106(435), pages 387-400, March. [Downloadable!] (restricted)
  11. Snower, Dennis J., 1994. "Converting Unemployment Benefits into Employment Subsidies," CEPR Discussion Papers 930, C.E.P.R. Discussion Papers. [Downloadable!] (restricted)
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  12. Eissa, Nada & Liebman, Jeffrey B, 1996. "Labor Supply Response to the Earned Income Tax Credit," The Quarterly Journal of Economics, MIT Press, vol. 111(2), pages 605-37, May. [Downloadable!] (restricted)
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  13. Heckman, James J & Ichimura, Hidehiko & Todd, Petra, 1998. "Matching as an Econometric Evaluation Estimator," Review of Economic Studies, Blackwell Publishing, vol. 65(2), pages 261-94, April. [Downloadable!] (restricted)
  14. Dubin, Jeffrey A. & Rivers, Douglas, 1993. "Experimental estimates of the impact of wage subsidies," Journal of Econometrics, Elsevier, vol. 56(1-2), pages 219-242, March. [Downloadable!] (restricted)
  15. James J. Heckman & Jeffrey A. Smith & Christopher Taber, 1996. "What Do Bureaucrats Do? The Effects of Performance Standards and Bureaucratic Preferences on Acceptance into the JTPA Program," NBER Working Papers 5535, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
  16. Lawrence F. Katz, 1996. "Wage Subsidies for the Disadvantaged," NBER Working Papers 5679, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
  17. Greenhalgh, Christine & Stewart, Mark, 1982. "The effects and Determinants of Training," The Warwick Economics Research Paper Series (TWERPS) 213, University of Warwick, Department of Economics.
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  18. Woodbury, Stephen A & Spiegelman, Robert G, 1987. "Bonuses to Workers and Employers to Reduce Unemployment: Randomized Trials in Illinois," American Economic Review, American Economic Association, vol. 77(4), pages 513-30, September. [Downloadable!] (restricted)
  19. James J. Heckman & Lance Lochner & Christopher Taber, 1998. "Explaining Rising Wage Inequality: Explorations with a Dynamic General Equilibrium Model of Labor Earnings with Heterogeneous Agents," NBER Working Papers 6384, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
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  20. van den Berg, Gerard J & van Ours, Jan C, 1994. "Unemployment Dynamics and Duration Dependence in France, the Netherlands and the United Kingdom," Economic Journal, Royal Economic Society, vol. 104(423), pages 432-43, March. [Downloadable!] (restricted)
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Cited by:
(explanations, 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.)

  1. Gerfin, Michael & Lechner, Michael & Steiger, Heidi, 2002. "Does subsidised temporary employment get the unemployed back to work? An econometric analysis of two different schemes," 10th International Conference on Panel Data, Berlin, July 5-6, 2002 A2-2, International Conferences on Panel Data. [Downloadable!]
    Other versions:
  2. Bruno Contini & Francesca Cornaglia & Claudio Malpede & Enrico Rettore, 2002. "Measuring the impact of the Italian CFL programme on the job opportunities for the youths," 10th International Conference on Panel Data, Berlin, July 5-6, 2002 B1-4, International Conferences on Panel Data. [Downloadable!]
  3. Kalwij, Adriaan S., 2001. "Individuals' Unemployment Experiences: Heterogeneity and Business Cycle Effects," IZA Discussion Papers 370, Institute for the Study of Labor (IZA). [Downloadable!]
  4. Frank Oskamp & Dennis J. Snower, 2007. "Interactions between Employment and Training Policies," Kiel Working Papers 1389, Kiel Institute for the World Economy. [Downloadable!]
  5. Bijie Ren, 2008. "The regional effects of marginal wage subsidies," Psychometrika, Springer, vol. 3(4), pages 598-626, December. [Downloadable!] (restricted)
  6. Galasso, Emanuela & Ravallion, Martin & Salvia, Agustin, 2001. "Assisting the transition from workfare to work : a randomized experiment," Policy Research Working Paper Series 2738, The World Bank. [Downloadable!]
    Other versions:
  7. Alessio J. G. Brown & Christian Merkl & Dennis J. Snower, 2007. "Comparing the Effectiveness of Employment Subsidies," IZA Discussion Papers 2835, Institute for the Study of Labor (IZA). [Downloadable!]
    Other versions:
  8. Moreno-Serra, Rodrigo & Wagstaff, Adam, 2009. "System-wide impacts of hospital payment reforms : evidence from central and eastern Europe and central Asia," Policy Research Working Paper Series 4987, The World Bank. [Downloadable!]
  9. cipollone piero & Anita Guelfi, 2006. "The value of flexible contracts; evidence from an italian panel of industrial firms," Temi di discussione (Economic working papers) 583, Bank of Italy, Economic Research Department. [Downloadable!]
  10. Ammermüller, Andreas & Zwick, Thomas & Boockmann, Bernhard & Maier, Michael, 2007. "Do hiring subsidies reduce unemployment among the elderly? Evidence from two natural experiments," ZEW Discussion Papers 07-001, ZEW - Zentrum für Europäische Wirtschaftsforschung / Center for European Economic Research. [Downloadable!]
  11. Kalwij, Adriaan S., 2001. "Individuals' Unemployment Durations over the Business Cycle," IZA Discussion Papers 369, Institute for the Study of Labor (IZA). [Downloadable!]
  12. Ken Judge & Iain Paterson, 2001. "Poverty, Income Inequality and Health," Treasury Working Paper Series 01/29, New Zealand Treasury. [Downloadable!]
  13. John Van Reenen, 2001. "The new economy: reality and policy," Fiscal Studies, Institute for Fiscal Studies, vol. 22(3), pages 307-336, September. [Downloadable!]
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