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A Hiring Subsidy for Long-Term Unemployed in a Search Model with PES and Random Search

Author

Listed:
  • Jahn, Elke J

    (Friedrich-Alexander-Universitat Erlangen-Nurnberg)

  • Thomas Wagner

Abstract

Our search model combines two search methods, the public employment service (PES) and random search. The separation rate is endogenous, the job matching process consists of three stages. In the first and the second respectively the short-term (STU) and the long-term unemployed (LTU) randomly search for a vacancy. In the last stage the PES matches registered jobseekers with registered vacancies. The LTU cause training costs and, during the training period, have a lower marginal product than the STU. The effects of the hiring subsidy and of profiling techniques to increase the effectiveness of the PES depend on the target group. For target groups, who have relatively low private search costs in comparison with their productivity, not only the hiring subsidy but also the job placement activities of the PES are counterproductive and reduce overall employment.

Suggested Citation

  • Jahn, Elke J & Thomas Wagner, 2003. "A Hiring Subsidy for Long-Term Unemployed in a Search Model with PES and Random Search," Royal Economic Society Annual Conference 2003 113, Royal Economic Society.
  • Handle: RePEc:ecj:ac2003:113
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    References listed on IDEAS

    as
    1. Pissarides, C A, 1979. "Job Matchings with State Employment Agencies and Random Search," Economic Journal, Royal Economic Society, vol. 89(356), pages 818-833, December.
    2. Mortensen, Dale & Pissarides, Christopher, 2011. "Job Creation and Job Destruction in the Theory of Unemployment," Economic Policy, Russian Presidential Academy of National Economy and Public Administration, vol. 1, pages 1-19.
    3. Mortensen, Dale T. & Pissarides, Christopher A., 1999. "New developments in models of search in the labor market," Handbook of Labor Economics,in: O. Ashenfelter & D. Card (ed.), Handbook of Labor Economics, edition 1, volume 3, chapter 39, pages 2567-2627 Elsevier.
    4. Christopher A. Pissarides & Barbara Petrongolo, 2001. "Looking into the Black Box: A Survey of the Matching Function," Journal of Economic Literature, American Economic Association, vol. 39(2), pages 390-431, June.
    5. Arulampalam, Wiji, 2001. "Is Unemployment Really Scarring? Effects of Unemployment Experiences on Wages," Economic Journal, Royal Economic Society, vol. 111(475), pages 585-606, November.
    Full references (including those not matched with items on IDEAS)

    More about this item

    Keywords

    matching model; hiring subsidy; endogenous separation rate; active labour market policy; PES and search market;

    JEL classification:

    • J41 - Labor and Demographic Economics - - Particular Labor Markets - - - Labor Contracts
    • J63 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Turnover; Vacancies; Layoffs
    • J64 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Unemployment: Models, Duration, Incidence, and Job Search
    • J68 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Public Policy

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