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Do Earnings Subsidies Affect Job Choice? The Impact of SSP Subsidies on Wage Growth

  • Helen Connolly


    (Boston College)

  • Peter Gottschalk


    (Boston College)

This paper asks whether wage subsidies encourages participants to move into jobs with greater wage growth. We provide an analytical framework that identifies the key causal links between earnings subsidies and both within-and between-job wage growth. This framework highlights the importance of the form of the subsidy on the decision about the type of job to accept. We find that the subsidy will lead participants to place a higher value on jobs with wage growth if the relationship between pre-and post-subsidy earnings is convex, but the subsidy is predicted to have no effect on within-job wage growth if the transformation is linear. The subsidy is also predicted to affect between-job wage growth by increasing on-the- job search and altering the reservation wage. We use this framework to analyze the effects of the Canadian Self-Sufficiency Project experiment. We find that this subsidy did not affect within-job wage growth but did increase wage gains between jobs.

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Paper provided by Boston College Department of Economics in its series Boston College Working Papers in Economics with number 498.

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Length: 28 pages
Date of creation: 01 Sep 2001
Date of revision: 26 Aug 2006
Publication status: forthcoming, Canadian Journal of Economics
Handle: RePEc:boc:bocoec:498
Note: This paper was previously circulated as "Returns to Tenure, Experience and Job Match for Long-Term Welfare Recipients: Do Earnings Subsidies Matter?"
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  1. Joseph G. Altonji & Nicolas Williams, 2005. "Do Wages Rise with Job Seniority? A Reassessment," ILR Review, Cornell University, ILR School, vol. 58(3), pages 370-397, April.
  2. Helen Connolly & Peter Gottschalk, 2000. "Stepping-stone Jobs: Theory and Evidence," Boston College Working Papers in Economics 427, Boston College Department of Economics, revised 02 Apr 2001.
  3. Altonji, Joseph G & Shakotko, Robert A, 1987. "Do Wages Rise with Job Seniority?," Review of Economic Studies, Wiley Blackwell, vol. 54(3), pages 437-59, July.
  4. David Card & Charles Michalopoulos & Philip K. Robins, 2001. "The Limits to Wage Growth: Measuring the Growth Rate of Wages For Recent Welfare Leavers," NBER Working Papers 8444, National Bureau of Economic Research, Inc.
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