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The effect of hiring subsidies on regular wages

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  • Moczall, Andreas

Abstract

What happens to the wages of regular workers in establishments subsidized with hiring subsidies? Does hiring programme participants result in windfalls that are dis-tributed among regular workers? Do these reduce their wage demands to avoid be-ing substituted by subsidized workers? Using linked employer-employee data from Germany, I estimate the effects of subsidizing an establishment on regular workers' wages using spell fixed effects regression. I find that hiring subsidy schemes do increase the daily wages of regular workers by up to almost one per cent in the manufacturing sector. These effects are limited to large establishments and above-median local unemployment rates. They occur within the establishment itself and are not merely the result of varying regional exposure to ALMP programmes. I conclude that hiring subsidies have a notable impact on regular workers beyond mere substitution.

Suggested Citation

  • Moczall, Andreas, 2015. "The effect of hiring subsidies on regular wages," VfS Annual Conference 2015 (Muenster): Economic Development - Theory and Policy 113225, Verein für Socialpolitik / German Economic Association.
  • Handle: RePEc:zbw:vfsc15:113225
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    2. Michael Moritz & Bastian Stockinger & Merlind Trepesch, 2017. "Multinational Resilience or Dispensable Jobs? German FDI and Employment in the Czech Republic Around the Great Recession," Prague Economic Papers, Prague University of Economics and Business, vol. 2017(3), pages 345-359.
    3. Henna Busk & Christine Dauth & Elke J. Jahn, 2017. "Do Changes in Regulation Affect Temporary Agency Workers’ Job Satisfaction?," Industrial Relations: A Journal of Economy and Society, Wiley Blackwell, vol. 56(3), pages 514-544, July.
    4. Reichelt, Malte & Abraham, Martin, 2015. "Occupational and regional mobility as substitutes : a new approach to understanding job changes and wage inequality," IAB-Discussion Paper 201514, Institut für Arbeitsmarkt- und Berufsforschung (IAB), Nürnberg [Institute for Employment Research, Nuremberg, Germany].
    5. Vom Berge, Philipp & Schmillen, Achim, 2015. "Direct and indirect effects of mass layoffs : evidence from geo-referenced data," IAB-Discussion Paper 201511, Institut für Arbeitsmarkt- und Berufsforschung (IAB), Nürnberg [Institute for Employment Research, Nuremberg, Germany].
    6. Walwei, Ulrich, 2015. "From deregulation to re-regulation : trend reversal in German labour market institutions and its possible implications," IAB-Discussion Paper 201510, Institut für Arbeitsmarkt- und Berufsforschung (IAB), Nürnberg [Institute for Employment Research, Nuremberg, Germany].

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    More about this item

    JEL classification:

    • J38 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Public Policy
    • H25 - Public Economics - - Taxation, Subsidies, and Revenue - - - Business Taxes and Subsidies
    • C23 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Models with Panel Data; Spatio-temporal Models

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