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Do Long-term Unemployed Workers Benefit from Targeted Wage Subsidies?

  • Michael Lechner
  • Benjamin Schünemann
  • Conny Wunsch

    ()

    (University of Basel)

We evaluate a wage subsidy program that is targeted at long-term unemployed workers in Germany. We use an alternative identification procedure compared to empirical studies con­ducted so far. Exploiting the particular program regulations and large administrative data we estimate the impact of program availability using a regression discontinuity framework. Our results suggest no significant impact of the availability of the subsidy on labor market out­comes of the target group. Even though our analysis lacks some statistical power, our findings do not support the substantial positive effects obtained from matching studies. As our ap­proach does not require observability of all drivers of selection, previous empirical studies justifying government expenditures on wage subsidies based on matching methods should be reconsidered.

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Paper provided by Faculty of Business and Economics - University of Basel in its series Working papers with number 2013/14.

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Date of creation: 2013
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Handle: RePEc:bsl:wpaper:2013/14
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