IDEAS home Printed from https://ideas.repec.org/
MyIDEAS: Log in (now much improved!) to save this paper

Comparing the Effectiveness of Employment Subsidies

  • Brown, Alessio J. G.

    ()

    (affiliation not available)

  • Merkl, Christian

    ()

    (University of Erlangen-Nuremberg)

  • Snower, Dennis J.

    ()

    (Kiel Institute for the World Economy)

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://ftp.iza.org/dp2835.pdf
Download Restriction: no

Paper provided by Institute for the Study of Labor (IZA) in its series IZA Discussion Papers with number 2835.

as
in new window

Length: 34 pages
Date of creation: Jun 2007
Date of revision:
Handle: RePEc:iza:izadps:dp2835
Contact details of provider: Postal:
IZA, P.O. Box 7240, D-53072 Bonn, Germany

Phone: +49 228 3894 223
Fax: +49 228 3894 180
Web page: http://www.iza.org

Order Information: Postal: IZA, Margard Ody, P.O. Box 7240, D-53072 Bonn, Germany
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. Brian Bell & Richard Blundell & John Van Reenen, 1999. "Getting the unemployed back to work: the role of targeted wage subsidies," IFS Working Papers W99/12, Institute for Fiscal Studies.
  2. Schnabel, Claus, 2005. "Gewerkschaften und Arbeitgeberverbände: Organisationsgrade, Tarifbindung und Einflüsse auf Löhne und Beschäftigung," Discussion Papers 34, Friedrich-Alexander University Erlangen-Nuremberg, Chair of Labour and Regional Economics.
  3. Sunde, Uwe & Thalmaier, Anja & Zimmermann, Klaus F., 1999. "Arbeitsplätze für Geringqualifizierte," Wirtschaftsdienst – Zeitschrift für Wirtschaftspolitik (1949 - 2007), ZBW – German National Library of Economics / Leibniz Information Centre for Economics, vol. 79(12), pages 723-730.
  4. Saint-Paul, G., 1994. "Some Political Aspects of Unemployment," DELTA Working Papers 94-03, DELTA (Ecole normale supérieure).
  5. Fahr, René & Sunde, Uwe, 2004. "Occupational job creation: Patterns and implications," Munich Reprints in Economics 20488, University of Munich, Department of Economics.
  6. 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.
  7. repec:iab:iabzaf:v:43:i:1:p:53-71 is not listed on IDEAS
  8. repec:ces:ifosdt:v::y:2006:i::p:06-27 is not listed on IDEAS
  9. Dennis Snower & Christian Merkl & Alessio J. G. Brown, 2010. "An Incentive Theory of Matching," 2010 Meeting Papers 439, Society for Economic Dynamics.
  10. Yu-Fu Chen & Michael Funke, 2003. "Labour Demand in Germany: An Assessment of Non- Wage Labour Costs," Dundee Discussion Papers in Economics 154, Economic Studies, University of Dundee.
  11. 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.
  12. Paul R. Krugman, 1994. "Past and prospective causes of high unemployment," Economic Review, Federal Reserve Bank of Kansas City, issue Q IV, pages 23-43.
  13. Snower, Dennis J, 1994. "Converting Unemployment Benefits into Employment Subsidies," American Economic Review, American Economic Association, vol. 84(2), pages 65-70, May.
  14. Mortensen, Dale T & Pissarides, Christopher, 2001. "Taxes, Subsidies and Equilibrium Labour Market Outcomes," CEPR Discussion Papers 2989, C.E.P.R. Discussion Papers.
  15. Dennis J. Snower & Christian Merkl, 2006. "The Caring Hand that Cripples: The East German Labor Market after Reunification," American Economic Review, American Economic Association, vol. 96(2), pages 375-382, May.
  16. 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).
  17. Dale T. Mortensen & Christopher A. Pissarides, 1994. "Job Creation and Job Destruction in the Theory of Unemployment," Review of Economic Studies, Oxford University Press, vol. 61(3), pages 397-415.
  18. 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).
  19. Gabriele Cardullo & Bruno Van der Linden, 2007. "Employment Subsidies and Substitutable Skills: An Equilibrium Matching Approach," Applied Economics Quarterly (formerly: Konjunkturpolitik), Duncker & Humblot, Berlin, vol. 53(4), pages 375-404.
  20. Robert E. Hall & Paul R. Milgrom, 2005. "The Limited Influence of Unemployment on the Wage Bargain," NBER Working Papers 11245, National Bureau of Economic Research, Inc.
  21. Wolfgang Lechthaler & Christian Merkl & Dennis Snower, 2010. "Monetary Persistence and the Labor Market: A New Perspective," CESifo Working Paper Series 2935, CESifo Group Munich.
  22. Michael Kremer & Eric Maskin, 1996. "Wage Inequality and Segregation," Harvard Institute of Economic Research Working Papers 1777, Harvard - Institute of Economic Research.
  23. Gartner, Hermann & Merkl, Christian & Rothe, Thomas, 2009. "They are even larger! More (on) puzzling labor market volatilities," Kiel Working Papers 1545, Kiel Institute for the World Economy (IfW).
  24. Orszag, Mike & Snower, Dennis J., 1999. "Anatomy of Policy Complementarities," IZA Discussion Papers 41, Institute for the Study of Labor (IZA).
  25. Bovenberg, A.L. & Graafland, J.J. & de Mooij, R.A., 2000. "Tax reform and the Dutch labour market : An applied general equilibrium approach," Other publications TiSEM a22f887a-ce1a-4aa2-ad01-6, Tilburg University, School of Economics and Management.
  26. Christopher A. Pissarides, 2000. "Equilibrium Unemployment Theory, 2nd Edition," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262161877, March.
  27. Boone, Jan & van Ours, Jan C, 2004. "Effective Active Labour Market Policies," CEPR Discussion Papers 4707, C.E.P.R. Discussion Papers.
  28. 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).
  29. Michael P. Keane & Kenneth I. Wolpin, 1995. "The career decisions of young men," Working Papers 559, Federal Reserve Bank of Minneapolis.
  30. Richard B. Freeman, 1995. "Are Your Wages Set in Beijing?," Journal of Economic Perspectives, American Economic Association, vol. 9(3), pages 15-32, Summer.
  31. Orszag, J. Michael & Snower, Dennis J., 2003. "Designing employment subsidies," Labour Economics, Elsevier, vol. 10(5), pages 557-572, October.
  32. 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.
  33. Christopher J. O'Leary & Paul T. Decker & Stephen A. Wandner, 2003. "Cost-Effectiveness of Targeted Reemployment Bonuses," Upjohn Working Papers and Journal Articles 03-51, W.E. Upjohn Institute for Employment Research.
  34. Wienert, Helmut, 2006. "Einkommensdifferenzen zwischen Nicht-Akademikern und Akademikern," Wirtschaftsdienst – Zeitschrift für Wirtschaftspolitik (1949 - 2007), ZBW – German National Library of Economics / Leibniz Information Centre for Economics, vol. 86(2), pages 105-111.
  35. Ljungqvist, Lars & Sargent, Thomas J., 1997. "The European Unemployment Dilemma," Working Paper Series 481, Research Institute of Industrial Economics.
  36. 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.
  37. Kremer, M & Maskin, E, 1996. "Wage Inequality and Segregation by Skill," Working papers 96-23, Massachusetts Institute of Technology (MIT), Department of Economics.
  38. Fahr, René & Sunde, Uwe, 2001. "Disaggregate Matching Functions," IZA Discussion Papers 335, Institute for the Study of Labor (IZA).
  39. Orszag, Mike & Snower, Dennis J., 2002. "Unemployment Vouchers versus Low-Wage Subsidies," IZA Discussion Papers 537, Institute for the Study of Labor (IZA).
  40. Stephen A. Woodbury & Robert G. Spiegelman, . "Bonuses to Workers and Employers to Reduce unemployment: Randomized Trials in Illinois," Upjohn Working Papers and Journal Articles sawrgs1987, W.E. Upjohn Institute for Employment Research.
  41. Oskamp, Frank & Snower, Dennis J., 2006. "The effect of low-wage subsidies on skills and employment," Kiel Working Papers 1292, Kiel Institute for the World Economy (IfW).
  42. 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.
  43. 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.
  44. 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 - Leibniz Institute for Economic Research at the University of Munich, vol. 59(02), pages 06-27, 01.
  45. Orszag, Mike & Snower, Dennis J., 1997. "Youth Unemployment and Government Policy," CEPR Discussion Papers 1675, C.E.P.R. Discussion Papers.
  46. Layard, Richard & Nickell, Stephen & Jackman, Richard, 1991. "Unemployment: Macroeconomic Performance and the Labour Market," OUP Catalogue, Oxford University Press, number 9780198284345, December.
  47. 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.
  48. David T. Coe & Dennis J. Snower, 1997. "Policy Complementarities: The Case for Fundamental Labor Market Reform," IMF Staff Papers, Palgrave Macmillan, vol. 44(1), pages 1-35, March.
  49. Gilles Saint Paul, 1998. "The political consequences of unemployment," Economics Working Papers 343, Department of Economics and Business, Universitat Pompeu Fabra.
  50. 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).
  51. 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.
  52. Orszag, Mike & Snower, Dennis J., 1998. "Anatomy of policy complementarities," Open Access Publications from Kiel Institute for the World Economy 2252, Kiel Institute for the World Economy (IfW).
  53. repec:hhs:iuiwop:500 is not listed on IDEAS
  54. 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.
  55. 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.
  56. 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.
  57. Boss, Alfred, 2006. "Brauchen wir einen Kombilohn?," Kiel Working Papers 1279, Kiel Institute for the World Economy (IfW).
  58. E. Paul Durrenberger, 2005. "Labour," Chapters, in: A Handbook of Economic Anthropology, chapter 8 Edward Elgar Publishing.
  59. Nicholas Kaldor, 1936. "Wage Subsidies as a Remedy for Unemployment," Journal of Political Economy, University of Chicago Press, vol. 44, pages 721.
  60. Lawrence F. Katz, 1996. "Wage Subsidies for the Disadvantaged," NBER Working Papers 5679, National Bureau of Economic Research, Inc.
  61. 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.
  62. 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.
  63. Robert Shimer, 2005. "The Cyclical Behavior of Equilibrium Unemployment and Vacancies," American Economic Review, American Economic Association, vol. 95(1), pages 25-49, March.
  64. Boone, J. & van Ours, J.C., 2004. "Effective Labor Market Policies," Discussion Paper 2004-87, Tilburg University, Center for Economic Research.
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:iza:izadps:dp2835. 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: (Mark Fallak)

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.