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Subsidizing Domestic Services as a Tool to Fight Unemployment: Effectiveness and Hidden Costs

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  • Leduc, Elisabeth

    (Free University of Brussels)

  • Tojerow, Ilan

    (Free University of Brussels)

Abstract

European countries have increasingly adopted wage subsidies for the sector of domestic services to reduce low-skilled unemployment. Yet, empirical evidence on their effectiveness is scarce. In this paper, we use Belgian administrative data to estimate how participation in the subsidized domestic services sector impacts the labour market outcomes of program participants. Our identification strategy rests on a dynamic event study difference-in-differences model combined with coarsened exact matching. Our findings indicate that such subsidies can be effective in reducing unemployment and inactivity, but only by increasing employment within the subsidized domestic services sector. We also find that program participation deteriorates physical health, thus increasing the worker's probability of claiming disability insurance benefits.

Suggested Citation

  • Leduc, Elisabeth & Tojerow, Ilan, 2020. "Subsidizing Domestic Services as a Tool to Fight Unemployment: Effectiveness and Hidden Costs," IZA Discussion Papers 13544, Institute of Labor Economics (IZA).
  • Handle: RePEc:iza:izadps:dp13544
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    More about this item

    Keywords

    wage subsidies; low-skilled workers; unemployment; disability; domestic services; personal and household services; female employment;
    All these keywords.

    JEL classification:

    • J08 - Labor and Demographic Economics - - General - - - Labor Economics Policies
    • J24 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Human Capital; Skills; Occupational Choice; Labor Productivity
    • J28 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Safety; Job Satisfaction; Related Public Policy
    • J38 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Public Policy

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