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Effects of subsidizing the firstemployee - Empirical evidencefrom Finland

Author

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  • Annika Nivala

    (University of Turku)

Abstract

This paper studies the effects of a first employee wage subsidy imple-mented in parts of Finland in 2007–2011 using the universe of Finnishfirms. The subsidy, amounting to 30% of the wage costs of the firstemployee in the first year and 15% in the second, was targeted to en-trepreneurs without hired employees. The target group accounts forover half of the firm population. Comparing the firms in the eligiblearea to firms in the neighboring ineligible area, I find precisely esti-mated zero effect on the probability of becoming an employer and otherfirm outcomes. The zero average effect seems to be due to low take-upof the subsidy highlighting the role of take-up in effectiveness of busi-ness subsidies. Sole proprietor, large and new firms were more likelyto use the subsidy and the subsidized firms seemed to grow more incomparison to eligible firms that did not use the subsidy.

Suggested Citation

  • Annika Nivala, 2019. "Effects of subsidizing the firstemployee - Empirical evidencefrom Finland," Discussion Papers 129, Aboa Centre for Economics.
    • Handle: RePEc:tkk:dpaper:dp129
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    File URL: http://ace-economics.fi/kuvat/dp129.pdf
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    More about this item

    Keywords

    Business subsidies; Wage subsidies; Firm behavior; Labor demand; Entrepreneurship; Small Business;
    All these keywords.

    JEL classification:

    • H25 - Public Economics - - Taxation, Subsidies, and Revenue - - - Business Taxes and Subsidies
    • H32 - Public Economics - - Fiscal Policies and Behavior of Economic Agents - - - Firm
    • J23 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Labor Demand
    • J38 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Public Policy
    • M51 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Personnel Economics - - - Firm Employment Decisions; Promotions

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