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Fighting Long-term Unemployment with Targeted Employment Subsidies: Benefit Transfer Programme (BTP) versus Targeted Negative Income Tax (TNIT) / Die Bekämpfung der Langzeitarbeitslosigkeit durch zielgruppenorientierte Lohnsubventionen: Benefit Transfer Programme (BTP) versus „Einstiegsgeld“ für Langzeitarbeitslose im Vergleich

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  • Spermann Alexander

    () (University of Freiburg, Institute of Public Finance, Maximilianstr. 15, D-79100 Freiburg)

Abstract

An important feature of the European unemployment problem is the disincentive to supply labour for low-productivity workers due to generous levels of non-labour income in conjunction with marginal effective tax rates of around 100 % for low levels of income (poverty trap). Targeted employment subsidies are proposed to overcome this problem. Snower (1994, 1997) suggests a targeted employer subsidy scheme called “Benefit Transfer Programme (BTP)”. Jerger/ Spermann (1997) suggest a targeted employee subsidy scheme called “Targeted Negative Income Tax (TNIT)”. Both proposals solve the poverty trap problem for a limited time period without additional fiscal costs. In this paper, the employment effects of BTP and TNIT are compared in an extended model of equilibrium unemployment. It turns out that TNIT may in practice be associated with higher employment effects than BTP due to the role of transaction costs and asymmetric information.

Suggested Citation

  • Spermann Alexander, 1999. "Fighting Long-term Unemployment with Targeted Employment Subsidies: Benefit Transfer Programme (BTP) versus Targeted Negative Income Tax (TNIT) / Die Bekämpfung der Langzeitarbeitslosigkeit durch ziel," Journal of Economics and Statistics (Jahrbuecher fuer Nationaloekonomie und Statistik), De Gruyter, vol. 218(5-6), pages 647-657, October.
  • Handle: RePEc:jns:jbstat:v:218:y:1999:i:5-6:p:647-657
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    Citations

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    Cited by:

    1. Berthold, Norbert & von Berchem, Sascha, 2005. "Hartz IV: eine vertane Chance nutzen," Discussion Paper Series 79, Julius Maximilian University of Würzburg, Chair of Economic Order and Social Policy.
    2. Spermann, Alexander, 2014. "Zehn Jahre Hartz IV – Was hilft Langzeitarbeitslosen wirklich?," IZA Standpunkte 76, Institute for the Study of Labor (IZA).
    3. Laura Chadwick & Jürgen Volkert, 2003. "Making Work Pay: U.S. American models for a German context?," IAW Discussion Papers 08, Institut für Angewandte Wirtschaftsforschung (IAW).
    4. Holger Bonin & Wolfram Kempe & Hilmar Schneider, 2003. "Kombilohn oder Workfare?: Zur Wirksamkeit zweier arbeitsmarktpolitischer Strategien," Vierteljahrshefte zur Wirtschaftsforschung / Quarterly Journal of Economic Research, DIW Berlin, German Institute for Economic Research, vol. 72(1), pages 51-67.
    5. Spermann, Alexander & Strotmann, Harald, 2005. "The Targeted Negative Income Tax (TNIT) in Germany: Evidence from a Quasi Experiment," ZEW Discussion Papers 05-68, ZEW - Zentrum für Europäische Wirtschaftsforschung / Center for European Economic Research.
    6. Martin Petrick & Ingo Pies, 2007. "In search for rules that secure gains from cooperation: the heuristic value of social dilemmas for normative institutional economics," European Journal of Law and Economics, Springer, vol. 23(3), pages 251-271, June.
    7. Dessing, Maryke, 2004. "Implications for minimum-wage policies of an S-shaped labor-supply curve," Journal of Economic Behavior & Organization, Elsevier, vol. 53(4), pages 543-568, April.
    8. Breyer, Friedrich & Franz, Wolfgang & Homburg, Stefan & Schnabel, Reinhold & Wille, Eberhard, 2004. "Reform der sozialen Sicherung," EconStor Books, ZBW - German National Library of Economics, number 92399, March.
    9. Berthold, Norbert & Thode, Eric, 2000. "Umverteilung in der Mittelschicht: notwendiges Übel im Kampf gegen Armut?," Discussion Paper Series 34, Julius Maximilian University of Würzburg, Chair of Economic Order and Social Policy.

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