IDEAS home Printed from https://ideas.repec.org/
MyIDEAS: Login to save this paper or follow this series

Wage Subsidies for the Long Term Unemployed: A Search Theoretic Analysis

  • J Richardson
Registered author(s):

    The persistence of mass unemployment in many OECD countries in the 1980s and 1990s has led to renewed interest in active labour market policies. We examine one such policy, a wage subsidy for employers hiring the long-term unemployed, using a search-theoretic framework. We assume that long-term unemployment leads to a loss of human capital, and that a subsidy can offset the consequent training costs faced by employers hiring the long-term unemployed. We argue that unemployment would be unambiguously reduced by such a policy. Furthermore, the often-made criticism of wage subsidies that they mainly lead to substitution, merely churning the unemployed, is misplaced. There are positive externalities to substitution that lead firms to open more vacancies, many of which in turn will be filled by the short-term unemployed.

    If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.

    File URL: http://cep.lse.ac.uk/pubs/download/DP0347.pdf
    Download Restriction: no

    Paper provided by Centre for Economic Performance, LSE in its series CEP Discussion Papers with number dp0347.

    as
    in new window

    Length:
    Date of creation: May 1997
    Date of revision:
    Handle: RePEc:cep:cepdps:dp0347
    Contact details of provider: Web page: http://cep.lse.ac.uk/_new/publications/series.asp?prog=CEP

    References listed on IDEAS
    Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:

    as in new window
    1. Calmfors, L. & Skedinger, P., 1995. "Does Active Labour Market Policy Increase Employment? - Theoretical Considerations and Some Empirical Evidence from Sweden," Papers 590, Stockholm - International Economic Studies.
    2. Snower, Dennis J., 1994. "Converting Unemployment Benefits into Employment Subsidies," CEPR Discussion Papers 930, C.E.P.R. Discussion Papers.
    3. Martin Neil Baily & James Tobin, 1977. "Macroeconomic Effects of Selective Public Employment and Wage Subsidies," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 8(2), pages 511-544.
    4. Manning, Alan, 1993. "Wage Bargaining and the Phillips Curve: The Identification and Specification of Aggregate Wage Equations," Economic Journal, Royal Economic Society, vol. 103(416), pages 98-118, January.
    5. P. Diamond, 1980. "Aggregate Demand Management in Search Equilibrium," Working papers 268, Massachusetts Institute of Technology (MIT), Department of Economics.
    6. J Richardson, 1997. "Can Active Labour Market Policy Work? Some Theoretical Considerations," CEP Discussion Papers dp0331, Centre for Economic Performance, LSE.
    7. Calmfors, Lars & Forslund, Anders, 1991. "Real-Wage Determination and Labour Market Policies: The Swedish Experience," Economic Journal, Royal Economic Society, vol. 101(408), pages 1130-48, September.
    8. Pissarides, Christopher A, 1992. "Loss of Skill during Unemployment and the Persistence of Employment Shocks," The Quarterly Journal of Economics, MIT Press, vol. 107(4), pages 1371-91, November.
    Full references (including those not matched with items on IDEAS)

    This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

    When requesting a correction, please mention this item's handle: RePEc:cep:cepdps:dp0347. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: ()

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If references are entirely missing, you can add them using this form.

    If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    This information is provided to you by IDEAS at the Research Division of the Federal Reserve Bank of St. Louis using RePEc data.