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The employment effects of low-wage subsidies

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

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.

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Article provided by Elsevier in its journal Journal of Public Economics.

Volume (Year): 97 (2013)
Issue (Month): C ()
Pages: 49-60

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Handle: RePEc:eee:pubeco:v:97:y:2013:i:c:p:49-60
Contact details of provider: Web page: http://www.elsevier.com/locate/inca/505578

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  1. Brown, Alessio J. G. & Merkl, Christian & Snower, Dennis J., 2007. "Comparing the Effectiveness of Employment Subsidies," IZA Discussion Papers 2835, Institute for the Study of Labor (IZA).
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  16. David Card & Dean R. Hyslop, 2005. "Estimating the Effects of a Time-Limited Earnings Subsidy for Welfare-Leavers," Econometrica, Econometric Society, vol. 73(6), pages 1723-1770, November.
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