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A hiring subsidy for long-term unemployed in a search model with PES and random search


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  • Jahn, Elke J.
  • Wagner, Thomas


Our search model combines two search methods, the public employment service (PES) and random search. The separation rate is endogenous, the job matching process consists of three rounds. In the first and the second respectively the short-term (STU) and the long-term unemployed (LTU) randomly search for a vacancy. During the last round the PES matches registered jobseekers with registered vacancies. The LTU cause training costs and, during the training period, have a lower marginal product than the STU. The effects of the hiring subsidy and of profiling techniques to increase the effectiveness of the PES depend on the target group they are geared towards. For skill groups, who have relatively low private search costs in comparison with their productivity, not only the hiring subsidy but also the job placement activities of the PES are counterproductive and reduce overall employment. -- Das Modell kombiniert zwei Suchmethoden, den staatlichen Vermittlungsdienst (PES) und die private Jobsuche. Die Trennungsrate des Modells ist endogen, der Matching Prozeß umfasst drei Phasen. In der ersten und zweiten suchen jeweils die Kurzzeitarbeitslosen (STU) und die Langzeitarbeitslosen (LTU) nach annoncierten Stellen, in der dritten vermittelt der PES registrierte Jobsucher mit registrierten Vakanzen. LTU verursachen Trainingskosten und haben während der Einarbeitungszeit eine geringere Produktivität als STU. Die Wirkungen des Lohnkostenzuschusses für LTU und der Maßnahmen zur Erhöhung der Vermittlungseffektivität des PES hängen von der Zielgruppe ab. Für Zielgruppen, deren private Suchkosten im Vergleich zu ihrer Arbeitsproduktivität relativ gering sind, erweisen sich nicht nur der Lohnkostenzuschuss sondern auch die staatliche Vermittlungsaktivität als kontraproduktive Instrumente, die die gesamtwirtschaftliche Beschäftigung reduzieren.

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Paper provided by Friedrich-Alexander-University Erlangen-Nuremberg, Chair of Labour and Regional Economics in its series Discussion Papers with number 11.

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Date of creation: 2002
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Handle: RePEc:zbw:faulre:11

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Keywords: Matching model; hiring subsidy; endogenous separation rate; active labour market policy; PES; search market;

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  1. Barbara Petrongolo & Christopher A. Pissarides, 2000. "Looking Into the Black Box: A Survey of the Matching Function," CEP Discussion Papers dp0470, Centre for Economic Performance, LSE.
  2. Arulampalam, Wiji, 2001. "Is Unemployment Really Scarring? Effects of Unemployment Experiences on Wages," Economic Journal, Royal Economic Society, vol. 111(475), pages F585-606, November.
  3. Mortensen, Dale T & Pissarides, Christopher A, 1994. "Job Creation and Job Destruction in the Theory of Unemployment," Review of Economic Studies, Wiley Blackwell, vol. 61(3), pages 397-415, July.
  4. Pissarides, C A, 1979. "Job Matchings with State Employment Agencies and Random Search," Economic Journal, Royal Economic Society, vol. 89(356), pages 818-33, December.
  5. Mortensen, Dale T. & Pissarides, Christopher A., 1999. "New developments in models of search in the labor market," Handbook of Labor Economics, in: O. Ashenfelter & D. Card (ed.), Handbook of Labor Economics, edition 1, volume 3, chapter 39, pages 2567-2627 Elsevier.
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