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

Comparing the Effectiveness of Employment Subsidies

  • Brown, Alessio J G
  • Merkl, Christian
  • Snower, Dennis J.

This paper analyses theoretically and empirically how employment subsidies should be targeted. We contrast measures involving targeting workers with low incomes/abilities and targeting the unemployed under the criteria of "approximate welfare efficiency" (AWE). Thereby we can identify policies that (a)improve employment and welfare, (b)do not raise earnings inequality and (c)are self-financing. We construct a microfounded, dynamic model of hiring and separations and calibrate it with German data. The calibration shows that hiring vouchers can be AWE, while low-wage subsidies do not satisfy AWE. Furthermore, hiring vouchers targeted at the long-term unemployed are more effective than those targeted at low-ability workers.

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://www.cepr.org/active/publications/discussion_papers/dp.php?dpno=6334
Download Restriction: CEPR Discussion Papers are free to download for our researchers, subscribers and members. If you fall into one of these categories but have trouble downloading our papers, please contact us at subscribers@cepr.org

As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.

Paper provided by C.E.P.R. Discussion Papers in its series CEPR Discussion Papers with number 6334.

as
in new window

Length:
Date of creation: Jun 2007
Date of revision:
Handle: RePEc:cpr:ceprdp:6334
Contact details of provider: Postal: Centre for Economic Policy Research, 77 Bastwick Street, London EC1V 3PZ.
Phone: 44 - 20 - 7183 8801
Fax: 44 - 20 - 7183 8820

Order Information: Email:


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. Garloff, Alfred & Fitzenberger, Bernd & Kohn, Karsten, 2003. "Beschäftigung und Lohnstrukturen nach Qualifikationen und Altersgruppen: Eine empirische Analyse auf Basis der IAB-Beschäftigtenstichprobe," ZEW Discussion Papers 03-75, ZEW - Zentrum für Europäische Wirtschaftsforschung / Center for European Economic Research.
  2. Hui, Weng T. & Trivedi, P. K., 1986. "Duration dependence, targeted employment subsidies and unemployment benefits," Journal of Public Economics, Elsevier, vol. 31(1), pages 105-129, October.
  3. Christopher J. O'Leary & Paul T. Decker & Stephen A. Wandner, . "Cost-Effectiveness of Targeted Reemployment Bonuses," Upjohn Working Papers and Journal Articles cjo2005jhr, W.E. Upjohn Institute for Employment Research.
  4. Christopher A. Pissarides, 2000. "Equilibrium Unemployment Theory, 2nd Edition," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262161877, June.
  5. Sunde, Uwe & Thalmaier, Anja & Zimmermann, Klaus F., 1999. "Arbeitsplätze für Geringqualifizierte," Wirtschaftsdienst – Zeitschrift für Wirtschaftspolitik (1998 - 2007), ZBW – German National Library of Economics / Leibniz Information Centre for Economics, vol. 79(12), pages 723-730.
  6. Ralf A. Wilke, 2005. "New Extimates of the Duration and Risk of Unemployment for West-Germany," Schmollers Jahrbuch : Journal of Applied Social Science Studies / Zeitschrift für Wirtschafts- und Sozialwissenschaften, Duncker & Humblot, Berlin, vol. 125(2), pages 207-237.
  7. Paul Krugman, 1994. "Past and prospective causes of high unemployment," Economic Review, Federal Reserve Bank of Kansas City, issue Q IV, pages 23-43.
  8. Snower, Dennis J., 1994. "Converting Unemployment Benefits into Employment Subsidies," CEPR Discussion Papers 930, C.E.P.R. Discussion Papers.
  9. Robert E. Hall & Paul R. Milgrom, 2008. "The Limited Influence of Unemployment on the Wage Bargain," American Economic Review, American Economic Association, vol. 98(4), pages 1653-74, September.
  10. Woodbury, Stephen A & Spiegelman, Robert G, 1987. "Bonuses to Workers and Employers to Reduce Unemployment: Randomized Trials in Illinois," American Economic Review, American Economic Association, vol. 77(4), pages 513-30, September.
  11. Orszag, Jonathan Michael & Snower, Dennis J., 2000. "The effectiveness of employment vouchers : a simple approach," Open Access Publications from Kiel Institute for the World Economy 2519, Kiel Institute for the World Economy (IfW).
  12. Dennis Snower & Christian Merkl & Alessio J. G. Brown, 2010. "An Incentive Theory of Matching," 2010 Meeting Papers 439, Society for Economic Dynamics.
  13. Brian Bell & Richard Blundell & John Reenen, 1999. "Getting the Unemployed Back to Work: The Role of Targeted Wage Subsidies," International Tax and Public Finance, Springer, vol. 6(3), pages 339-360, August.
  14. Gartner, Hermann & Merkl, Christian & Rothe, Thomas, 2009. "They Are Even Larger! More (on) Puzzling Labor Market Volatilities," IZA Discussion Papers 4403, Institute for the Study of Labor (IZA).
  15. Fahr, René & Sunde, Uwe, 2001. "Disaggregate Matching Functions," IZA Discussion Papers 335, Institute for the Study of Labor (IZA).
  16. Alfred Boss, 2006. "Brauchen wir einen Kombilohn?," Kiel Working Papers 1279, Kiel Institute for the World Economy.
  17. Orszag, Mike & Snower, Dennis J., 1997. "Youth Unemployment and Government Policy," CEPR Discussion Papers 1675, C.E.P.R. Discussion Papers.
  18. Lars Ljungqvist & Thomas J. Sargent, 1998. "The European Unemployment Dilemma," Journal of Political Economy, University of Chicago Press, vol. 106(3), pages 514-550, June.
  19. Bovenberg, A Lans & de Mooij, Ruud A & Graafland, Johan J, 1998. "Tax Reform and the Dutch Labour Market: An Applied General Equilibrium Approach," CEPR Discussion Papers 1983, C.E.P.R. Discussion Papers.
  20. Saint-Paul, Gilles, 1994. "Some Political Aspects of Unemployment," CEPR Discussion Papers 949, C.E.P.R. Discussion Papers.
  21. Merkl, Christian & Snower, Dennis J., 2006. "The Caring Hand that Cripples: The East German Labour Market after Reunification," CEPR Discussion Papers 5656, C.E.P.R. Discussion Papers.
  22. Michael Kremer & Eric Maskin, 1996. "Wage Inequality and Segregation," Harvard Institute of Economic Research Working Papers 1777, Harvard - Institute of Economic Research.
  23. Boone, Jan & van Ours, Jan C., 2004. "Effective Active Labor Market Policies," IZA Discussion Papers 1335, Institute for the Study of Labor (IZA).
  24. Hans-Werner Sinn & Christian Holzner & Wolfgang Meister & Wolfgang Ochel & Martin Werding, 2006. "Aktivierende Sozialhilfe 2006 - das Kombilohn-Modell des ifo Instituts," Ifo Schnelldienst, Ifo Institute for Economic Research at the University of Munich, vol. 59(02), pages 06-27, 01.
  25. Gilles Saint Paul, 1998. "The political consequences of unemployment," Economics Working Papers 343, Department of Economics and Business, Universitat Pompeu Fabra.
  26. E. Paul Durrenberger, 2005. "Labour," Chapters, in: A Handbook of Economic Anthropology, chapter 8 Edward Elgar.
  27. Lindbeck, Assar & Snower, Dennis J, 1987. "Strike and Lock-Out Threats and Fiscal Policy," Oxford Economic Papers, Oxford University Press, vol. 39(4), pages 760-84, December.
  28. Oliver Jean Blanchard & Peter Diamond, 1989. "The Beveridge Curve," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 20(1), pages 1-76.
  29. Uwe Jirjahn & Christian Pfeifer & Georgi Tsertsvadze, 2009. "Mikroökonomische Beschäftigungseffekte des Hamburger Modells zur Beschäftigungsförderung - Evaluation eines Kombilohns," Schmollers Jahrbuch : Journal of Applied Social Science Studies / Zeitschrift für Wirtschafts- und Sozialwissenschaften, Duncker & Humblot, Berlin, vol. 129(1), pages 37-82.
  30. Michael Kremer & Eric Maskin, 1996. "Wage Inequality and Segregation by Skill," NBER Working Papers 5718, National Bureau of Economic Research, Inc.
  31. Richard B. Freeman, 1995. "Are Your Wages Set in Beijing?," Journal of Economic Perspectives, American Economic Association, vol. 9(3), pages 15-32, Summer.
  32. repec:iab:iabzaf:v:43:i:1:p:53-71 is not listed on IDEAS
  33. Coe, David T & Snower, Dennis J., 1997. "Policy Complementarities: The Case for Fundamental Labour Market Reform," CEPR Discussion Papers 1585, C.E.P.R. Discussion Papers.
  34. Orszag, J. Michael & Snower, Dennis J., 2003. "Designing employment subsidies," Labour Economics, Elsevier, vol. 10(5), pages 557-572, October.
  35. Frank Oskamp & Dennis J. Snower, 2006. "The Effect of Low-Wage Subsidies on Skills and Employment," Kiel Working Papers 1292, Kiel Institute for the World Economy.
  36. Ronald Bachmann, 2005. "Labour Market Dynamics in Germany: Hirings, Separations, and Job-to-Job Transitions over the Business Cycle," SFB 649 Discussion Papers SFB649DP2005-045, Sonderforschungsbereich 649, Humboldt University, Berlin, Germany.
  37. René Fahr & Uwe Sunde, 2004. "Occupational job creation: patterns and implications," Oxford Economic Papers, Oxford University Press, vol. 56(3), pages 407-435, July.
  38. Warren, Ronald Jr., 1996. "Returns to scale in a matching model of the labor market," Economics Letters, Elsevier, vol. 50(1), pages 135-142, January.
  39. Wolfgang Lechthaler & Christian Merkl & Dennis Snower, 2008. "Monetary Persistence and the Labor Market: A New Perspective," Kiel Working Papers 1409, Kiel Institute for the World Economy.
  40. Orszag, Mike & Snower, Dennis J., 2002. "Unemployment Vouchers versus Low-Wage Subsidies," IZA Discussion Papers 537, Institute for the Study of Labor (IZA).
  41. Dale T. Mortensen & Christopher A. Pissarides, 1993. "Job Creation and Job Destruction in the Theory of Unemployment," CEP Discussion Papers dp0110, Centre for Economic Performance, LSE.
  42. Yu-Fu Chen & Michael Funke, 2005. "Non-Wage Labour Costs, Policy Uncertainty And Labour Demand - A Theoretical Assessment," Scottish Journal of Political Economy, Scottish Economic Society, vol. 52(5), pages 687-709, November.
  43. DREZE, Jacques H. & SNEESSENS, Henri, 1994. "Technical Development, Competition from Low-Wage Economies and Low-Skilled Unemployment," CORE Discussion Papers 1994036, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
  44. Yu-Fu Chen & Michael Funke, 2003. "Labour Demand in Germany: An Assessment of Non-Wage Labour Costs," CESifo Working Paper Series 952, CESifo Group Munich.
  45. Layard, Richard & Nickell, Stephen & Jackman, Richard, 1991. "Unemployment: Macroeconomic Performance and the Labour Market," OUP Catalogue, Oxford University Press, number 9780198284345, March.
  46. Dale T. Mortensen & Christopher A. Pissarides, 2002. "Taxes, Subsidies and Equilibrium Labor Market Outcomes," CEP Discussion Papers dp0519, Centre for Economic Performance, LSE.
  47. Gabriele, CARDULLO & Bruno, VANDERLINDEN, 2006. "Employment subsidies and substitutable skills : An equilibrium matching approach," Discussion Papers (ECON - Département des Sciences Economiques) 2006010, Université catholique de Louvain, Département des Sciences Economiques.
  48. repec:ner:tilbur:urn:nbn:nl:ui:12-83974 is not listed on IDEAS
  49. repec:ces:ifosdt:v::y:2006:i::p:06-27 is not listed on IDEAS
  50. Phelps, Edmund S, 1994. "Low-Wage Employment Subsidies versus the Welfare State," American Economic Review, American Economic Association, vol. 84(2), pages 54-58, May.
  51. Robert Shimer, 2005. "The Cyclical Behavior of Equilibrium Unemployment and Vacancies," American Economic Review, American Economic Association, vol. 95(1), pages 25-49, March.
  52. J. Michael Orszag & Dennis J. Shower, 2000. "The Effectiveness of Employment Vouchers: A Simple Approach," German Economic Review, Verein für Socialpolitik, vol. 1(4), pages 385-419, November.
  53. Snower, Dennis J. & Merkl, Christian, 2006. "The Caring Hand that Cripples: The East German Labor Market After Reunification (Detailed Version)," IZA Discussion Papers 2066, Institute for the Study of Labor (IZA).
  54. Michael P. Keane & Kenneth I. Wolpin, 1995. "The career decisions of young men," Working Papers 559, Federal Reserve Bank of Minneapolis.
  55. Dickens, William T & Lang, Kevin, 1988. "The Reemergence of Segmented Labor Market Theory," American Economic Review, American Economic Association, vol. 78(2), pages 129-34, May.
  56. Boone, J. & van Ours, J.C., 2004. "Effective Labor Market Policies," Discussion Paper 2004-87, Tilburg University, Center for Economic Research.
  57. Riphahn, Regina T. & Thalmaier, Anja & Zimmermann, Klaus F., 1999. "Report No. 2: Schaffung von Arbeitsplätzen für Geringqualifizierte," IZA Research Reports 2, Institute for the Study of Labor (IZA).
  58. Bernd Fitzenberger & Alfred Garloff & Karsten Kohn, 2004. "Beschäftigung und Lohnstrukturen nach Qualifikationen und Altersgruppen : eine empirische Analyse auf der Basis der IAB- Beschäftigtenstichprobe," Working Papers of the Research Group Heterogenous Labor 04-01, Research Group Heterogeneous Labor, University of Konstanz/ZEW Mannheim.
  59. repec:dgr:kubcen:200487 is not listed on IDEAS
  60. Lawrence F. Katz, 1996. "Wage Subsidies for the Disadvantaged," NBER Working Papers 5679, National Bureau of Economic Research, Inc.
  61. Wienert, Helmut, 2006. "Einkommensdifferenzen zwischen Nicht-Akademikern und Akademikern," Wirtschaftsdienst – Zeitschrift für Wirtschaftspolitik (1998 - 2007), ZBW – German National Library of Economics / Leibniz Information Centre for Economics, vol. 86(2), pages 105-111.
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:cpr:ceprdp:6334. 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.