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Do Wage Subsidies Increase Employment in Subsidized Firms?

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  • AKI KANGASHARJU

Abstract

This paper examines whether subsidized jobs have contributed to employment in subsidized firms or have merely substituted for non-subsidized ones. The data-set is an unbalanced panel of some 31,000 firms that are followed annually between 1995 and 2002. The analysis is based on difference-in-differences, which is adjusted by regression and matching methods. The results indicate that wage subsidies stimulate employment, and that the magnitude of the effect is as aimed. I also found that subsidies have no sizeable effects on non-subsidized firms of the industry or the geographical area in question. Copyright (c) The London School of Economics and Political Science 2006.

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  • Aki Kangasharju, 2007. "Do Wage Subsidies Increase Employment in Subsidized Firms?," Economica, London School of Economics and Political Science, vol. 74(293), pages 51-67, February.
  • Handle: RePEc:bla:econom:v:74:y:2007:i:293:p:51-67
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    Cited by:

    1. Dummert, Sandra & Hohendanner, Christian, 2016. "Beschäftigungseffekte von Ein-Euro-Jobs in den Einsatzbetrieben," IAB Discussion Paper 201638, Institut für Arbeitsmarkt- und Berufsforschung (IAB), Nürnberg [Institute for Employment Research, Nuremberg, Germany].
    2. Miyake, Yusuke & Yasuoka, Masaya, 2016. "Subsidy Policy and Elderly Labor," MPRA Paper 75704, University Library of Munich, Germany.
    3. Stijn Baert, 2016. "Wage subsidies and hiring chances for the disabled: some causal evidence," The European Journal of Health Economics, Springer;Deutsche Gesellschaft für Gesundheitsökonomie (DGGÖ), vol. 17(1), pages 71-86, January.
    4. Maciej Bukowski & Grzegorz Koloch & Piotr Lewandowski & Anna Baranowska & Iga Magda & Arkadiusz Szydlowski & Jacek Bielinski & Magdalena Bober & Malgorzata Sarzalska & Julian Zawistowski, 2008. "Employment in Poland 2007. Security on a Flexible Labour Market," Books and Reports published by IBS, Instytut Badan Strukturalnych, number zwp2007 edited by Maciej Bukowski.
    5. Moczall, Andreas, 2013. "Subsidies for substitutes? : New evidence on deadweight loss and substitution effects of a wage subsidy for hard-to-place job-seekers," IAB Discussion Paper 201305, Institut für Arbeitsmarkt- und Berufsforschung (IAB), Nürnberg [Institute for Employment Research, Nuremberg, Germany].
    6. Amina Ebrahim & Murray Leibbrandt & Vimal Ranchhod, 2017. "The effects of the Employment Tax Incentive on South African employment," WIDER Working Paper Series 005, World Institute for Development Economic Research (UNU-WIDER).
    7. David C. Maré, 2005. "Indirect Effects of Active Labour Market Policies," Working Papers 05_01, Motu Economic and Public Policy Research.
    8. Antonio Estache & Elena Ianchovichina & Robert Bacon & Ilhem Salamon, 2013. "Infrastructure and Employment Creation in the Middle East and North Africa," World Bank Publications, The World Bank, number 12237.
    9. Torben M. Andersen & Michael Svarer, 2007. "Flexicurity: Labour Market Performance in Denmark," CESifo Economic Studies, CESifo, vol. 53(3), pages 389-429, September.
    10. Moczall, Andreas, 2015. "The effect of hiring subsidies on regular wages," IAB Discussion Paper 201501, Institut für Arbeitsmarkt- und Berufsforschung (IAB), Nürnberg [Institute for Employment Research, Nuremberg, Germany].
    11. Sabine Engelmann & Beate Schirwitz & Marcel Thum, 2009. "Erstellung von Unbedenklichkeitsbescheinigungen im Bereich der öffentlich geförderten Beschäftigung," ifo Dresden Studien, ifo Institute - Leibniz Institute for Economic Research at the University of Munich, number 47, October.
    12. Nekby, Lena, 2008. "Active labor market programs for the integration of youths and immigrants into the labor market: the Nordic experience," Macroeconomía del Desarrollo 73, Naciones Unidas Comisión Económica para América Latina y el Caribe (CEPAL).
    13. Bartolucci, Francesco & Grilli, Leonardo & Pieroni, Luca, 2012. "Estimating dynamic causal effects with unobserved confounders: a latent class version of the inverse probability weighted estimator," MPRA Paper 43430, University Library of Munich, Germany.
    14. Ianchovichina, Elena & Estache, Antonio & Foucart, Renaud & Garsous, Grégoire & Yepes, Tito, 2013. "Job Creation through Infrastructure Investment in the Middle East and North Africa," World Development, Elsevier, vol. 45(C), pages 209-222.
    15. Hohendanner Christian, 2011. "Ein-Euro-Jobs und reguläre Beschäftigung / One-Euro-Jobs and Regular Employment: Eine Analyse potenzieller Substitutionseffekte mit Daten des IAB-Betriebspanels / An Analysis of Potential Substitution," Journal of Economics and Statistics (Jahrbuecher fuer Nationaloekonomie und Statistik), De Gruyter, vol. 231(2), pages 210-246, April.
    16. Venetoklis, Takis, 2004. "An Evaluation of Wage Subsidy Programs to SMEs Utilising Propensity Score Matching," Research Reports 106, VATT Institute for Economic Research.
    17. Torben Andersen & Michael Svarer, 2007. "Flexicurity – Labour Market Performance in Denmark," CESifo Working Paper Series 2108, CESifo Group Munich.
    18. Watanabe, Minoru & Yasuoka, Masaya, 2017. "Elderly Labor and Unemployment," MPRA Paper 82669, University Library of Munich, Germany.
    19. Mika Haapanen & Anu Tokila & Jari Ritsilä, 2005. "When are investment subsidies crucial for investments?," ERSA conference papers ersa05p466, European Regional Science Association.
    20. Nabanita Datta Gupta & Mona Larsen & Lars Brink Thomsen, 2013. "Do wage subsidies for disabled workers result in deadweight loss? – evidence from the Danish Flexjob scheme," Economics Working Papers 2013-24, Department of Economics and Business Economics, Aarhus University.
    21. Moczall, Andreas, 2015. "The effect of hiring subsidies on regular wages," Annual Conference 2015 (Muenster): Economic Development - Theory and Policy 113225, Verein für Socialpolitik / German Economic Association.

    More about this item

    JEL classification:

    • J18 - Labor and Demographic Economics - - Demographic Economics - - - Public Policy
    • J38 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Public Policy
    • J23 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Labor Demand

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