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How long and how much? Learning about the design of wage subsidies from policy changes and discontinuities

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  • Sjögren, Anna
  • Vikström, Johan

Abstract

Employment and wage subsidies are used to combat long-term unemployment, yet there is little research to guide the design of such programs. Discontinuities and changes in the design and implementation of wage subsidies under the Swedish New Start Jobs-policy allow us to study effects of both subsidy rate and subsidy duration. We find that wage subsidies have substantial effect on job-finding rates for those eligible. The effect is stronger for larger subsidies and more than doubles as the length of the subsidy doubles. Although employment drops as subsidies expire, the probability of being employed remains higher for workers finding subsidized employment also after the expiry of the employment subsidies.

Suggested Citation

  • Sjögren, Anna & Vikström, Johan, 2015. "How long and how much? Learning about the design of wage subsidies from policy changes and discontinuities," Labour Economics, Elsevier, vol. 34(C), pages 127-137.
    • Handle: RePEc:eee:labeco:v:34:y:2015:i:c:p:127-137
    DOI: 10.1016/j.labeco.2015.03.009
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    Cited by:

    1. Leduc, Elisabeth & Tojerow, Ilan, 2020. "Subsidizing Domestic Services as a Tool to Fight Unemployment: Effectiveness and Hidden Costs," IZA Discussion Papers 13544, IZA Network @ LISER.
    2. Forslund, Anders, 2025. "Mismatch, long-term unemployment and post-COVID labour market programmes in the Nordic countries," Working Paper Series 2025:5, IFAU - Institute for Evaluation of Labour Market and Education Policy.
    3. Nordström Skans, Oskar & Vikström, Johan & Lombardi, Stefano, 2018. "Wage subsidies, job-displacement and Swedish firms: A comparison between policy systems," Working Paper Series 2018:6, IFAU - Institute for Evaluation of Labour Market and Education Policy.
    4. Leduc, Elisabeth & Tojerow, Ilan, 2024. "Home work: Exploring the labor market effects of subsidizing domestic services," Labour Economics, Elsevier, vol. 90(C).
    5. Korpela, Heikki, 2025. "Displacement effects of the Finnish hiring subsidy - Evidence from a funding discontinuity," Working Papers 179, VATT Institute for Economic Research.
    6. Albanese, Andrea & Cockx, Bart & Dejemeppe, Muriel, 2024. "Long-term effects of hiring subsidies for low-educated unemployed youths," Journal of Public Economics, Elsevier, vol. 235(C).
    7. Canzian, Giulia & Meroni, Elena Claudia & Santangelo, Giulia, 2023. "Evaluation of a Flemish Active Labour Market Policy in the framework of the European Social Fund. Results and challenges," Socio-Economic Planning Sciences, Elsevier, vol. 88(C).
    8. Sam Desiere & Bart Cockx, 2021. "How Effective Are Hiring Subsidies to Reduce Long-Term Unemployment among Prime-Aged Jobseekers? Evidence from Belgium," CESifo Working Paper Series 9325, CESifo.
    9. Lombardi, Stefano & Skans, Oskar Nordström & Vikström, Johan, 2018. "Targeted wage subsidies and firm performance," Labour Economics, Elsevier, vol. 53(C), pages 33-45.
    10. Chiara Ardito & Fabio Berton & Lia Pacelli, 2023. "Combined and distributional effects of EPL reduction and hiring incentives: an assessment using the Italian “Jobs Act”," The Journal of Economic Inequality, Springer;Society for the Study of Economic Inequality, vol. 21(4), pages 925-954, December.
    11. Åslund, Olof & Forslund, Anders & Liljeberg, Linus, 2017. "Labour market entry of non-Labour migrants – Swedish evidence," Working Paper Series 2017:15, IFAU - Institute for Evaluation of Labour Market and Education Policy.
    12. Matthieu Delpierre, 2022. "The impact of hiring subsidies on survival of heterogeneous jobs," Economics Bulletin, AccessEcon, vol. 42(2), pages 907-912.
    13. Kunze, Astrid & Palczyńska, Marta & Magda, Iga, 2023. "The Employment Effects of a Wage Subsidy for the Young during an Economic Recovery," IZA Discussion Papers 16196, IZA Network @ LISER.
    14. Michele Cantarella & Maria Cristina Maurizio & Francesco Serti, 2025. "The temporary impact of permanent employment incentives: Evidence from Italy," Papers 2509.10193, arXiv.org, revised Nov 2025.

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    JEL classification:

    • J08 - Labor and Demographic Economics - - General - - - Labor Economics Policies
    • 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

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