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Subsidized temporary jobs: lock-in and stepping stone effects

  • Florent Fremigacciy

    (CREST and EPEE, Université d’Évry Val d’Essonne)

  • Antoine Terracol

    (EQUIPPE, Universités de Lille and CES, Université Paris 1)

This article evaluates the effectiveness of subsidized temporary jobs as stepping stones to regular employment. We study a French program (Activité Réduite) that allows job seekers to work part-time while remaining registered with the unemployment agency. Under this program, insured individuals are allowed to concurrently receive part of their unemployment benefits and wage income. Using an administrative data set, we fit a multivariate duration model correcting for the endogenous nature of the time to treatment, the time in treatment, and the level of the subsidy. We find that subsidized temporary jobs have both a significant lock-in effect and a significant positive post-treatment impact on the hazard rate to employment. Since individuals facing a high implicit tax rate have incentives to self-select into better part-time jobs, we also find that a higher tax rate leads to a weaker lockin effect and a stronger post-treatment effect. Simulations suggest that the lock-in effect first dominates, but that the overall effect eventually becomes positive. They also point to ways of improving the effectiveness of the policy.

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File URL: http://epee.univ-evry.fr/RePEc/2009/09-10.pdf
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Paper provided by Centre d'Études des Politiques Économiques (EPEE), Université d'Evry Val d'Essonne in its series Documents de recherche with number 09-10.

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Length: 31 pages
Date of creation: 2009
Date of revision:
Handle: RePEc:eve:wpaper:09-10
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  14. Cockx, Bart & Robin, Stéphane R. & Goebel, Christian, 2006. "Income Support Policies for Part-Time Workers: A Stepping-Stone to Regular Jobs? An Application to Young Long-Term Unemployed Women in Belgium," IZA Discussion Papers 2432, Institute for the Study of Labor (IZA).
  15. Boockmann, Bernhard & Hagen, Tobias, 2005. "Fixed-term Contracts as Sorting Mechanisms: Evidence From Job Durations in West Germany," ZEW Discussion Papers 05-85, ZEW - Zentrum für Europäische Wirtschaftsforschung / Center for European Economic Research.
  16. Crépon, Bruno & Dejemeppe, Muriel & Gurgand, Marc, 2005. "Counseling the Unemployed: Does It Lower Unemployment Duration and Recurrence?," IZA Discussion Papers 1796, Institute for the Study of Labor (IZA).
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  20. Eng Loh, 1994. "Employment probation as a sorting mechanism," Industrial and Labor Relations Review, ILR Review, Cornell University, ILR School, vol. 47(3), pages 471-486, April.
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