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Long-term unemployment and subsidizing vacancies in a growth-matching model

  • Birk, Angela
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    How can long-term unemployment be reduced by policy measures of the government? In this paper a growth-matching-model is developed, in which the unemployment pool consists of heterogeneous unemployed workers, short-term and long-term unemployed, and with an endogenous skill-depreciation of the long-term unemployed emerging as technical progress accelerates. For innovation countries characterized by rapid technical progress we show that through subsidizing vacancy creation which causes a substitution and an income effect long-term unemployment can be reduced. Since the positive substitution effect implied by subsidizing vacancy creation outweighs the negative income effect induced by taxing the household?s income, a positive employment effect results leading to additional job-matches and decreasing unemployment duration. Therefore, the introduction of subsidies will be favorable for achieving a reduction in long-term unemployment.

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    Paper provided by Hamburg Institute of International Economics (HWWA) in its series HWWA Discussion Papers with number 131.

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    Date of creation: 2001
    Date of revision:
    Handle: RePEc:zbw:hwwadp:26194
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    4. Birk, Angela, 2001. "Qualification-mismatch and long-term unemployment in a growth-matching model," HWWA Discussion Papers 128, Hamburg Institute of International Economics (HWWA).
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