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Can a wage subsidy system help reduce 50 per cent youth unemployment?: Evidence from South Africa

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  • Amina Ebrahim
  • Jukka Pirttilä

Abstract

The paper examines the incidence and employment impacts of the Employment Tax Incentive, a South African wage subsidy system that is targeted at the employers of low-wage youth. The paper uses a triple differences strategy and survey and administrative data, covering the universe of South African workers. The results reveal that the system has not had a positive influence on the employment rate of eligible workers. The number of jobs in the region where the subsidy is the greatest has increased, but the increase is not statistically significant, perhaps due to a low take-up rate.

Suggested Citation

  • Amina Ebrahim & Jukka Pirttilä, 2019. "Can a wage subsidy system help reduce 50 per cent youth unemployment?: Evidence from South Africa," WIDER Working Paper Series wp-2019-28, World Institute for Development Economic Research (UNU-WIDER).
    • Handle: RePEc:unu:wpaper:wp-2019-28
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    References listed on IDEAS

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    1. Emmanuel Saez & Benjamin Schoefer & David Seim, 2019. "Payroll Taxes, Firm Behavior, and Rent Sharing: Evidence from a Young Workers' Tax Cut in Sweden," American Economic Review, American Economic Association, vol. 109(5), pages 1717-1763, May.
    2. Gruber, Jonathan, 1997. "The Incidence of Payroll Taxation: Evidence from Chile," Journal of Labor Economics, University of Chicago Press, vol. 15(3), pages 72-101, July.
    3. Emmanuel Saez & Manos Matsaganis & Panos Tsakloglou, 2012. "Earnings Determination and Taxes: Evidence From a Cohort-Based Payroll Tax Reform in Greece," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 127(1), pages 493-533.
    4. Amina Ebrahim & Murray Leibbrandt & Vimal Ranchhod, 2017. "The effects of the Employment Tax Incentive on South African employment," WIDER Working Paper Series wp-2017-5, World Institute for Development Economic Research (UNU-WIDER).
    5. Amina Ebrahim & Murray Leibbrandt & Vimal Ranchhod, 2017. "The effects of the Employment Tax Incentive on South African employment," WIDER Working Paper Series 005, World Institute for Development Economic Research (UNU-WIDER).
    6. Vimal Ranchhod & Arden Finn, 2015. "Estimating the Effects of South Africa's Youth Employment Tax Incentive – An Update," SALDRU Working Papers 152, Southern Africa Labour and Development Research Unit, University of Cape Town.
    Full references (including those not matched with items on IDEAS)

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    More about this item

    Keywords

    Employment; Youth unemployment; Taxation; Wage subsidy; Administrative data;
    All these keywords.

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