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The employment effects of low-wage subsidies

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  • Huttunen, Kristiina
  • Pirttilä, Jukka
  • Uusitalo, Roope

Abstract

Low-wage subsidies are often proposed as a solution to the unemployment problem among the low skilled but the empirical evidence on their effects is still scarce. This paper examines the employment effects of a Finnish payroll tax subsidy scheme, which is targeted at the employers of older, full-time, low-wage workers. The system's clear eligibility criteria open up an opportunity for a reliable estimation of the causal impacts of the subsidy scheme. Our results indicate that the subsidy system had no effect on the employment rate or wages of the eligible groups, but it increased slightly working hours among those already at work.

Suggested Citation

  • Huttunen, Kristiina & Pirttilä, Jukka & Uusitalo, Roope, 2013. "The employment effects of low-wage subsidies," Journal of Public Economics, Elsevier, vol. 97(C), pages 49-60.
  • Handle: RePEc:eee:pubeco:v:97:y:2013:i:c:p:49-60 DOI: 10.1016/j.jpubeco.2012.09.007
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    More about this item

    Keywords

    Low-wage subsidies; Employment; Social security contributions;

    JEL classification:

    • H24 - Public Economics - - Taxation, Subsidies, and Revenue - - - Personal Income and Other Nonbusiness Taxes and Subsidies
    • J23 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Labor Demand
    • J68 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Public Policy

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