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Title:Do Earnings Subsidies Affect Job Choice? PDF Logo
Authors:Connolly, Helen
Gottschalk, Peter
Issue Date:2004
Series/Report no.:IZA Discussion paper series 1322
Abstract:It is widely acknowledged that earnings subsidies promote employment by increasing rewards to labor market activity. This paper asks whether subsidies also affect job duration and wage growth. We provide an analytical framework that identifies causal links between earnings subsidies, job turnover, and wage growth. This framework highlights the importance of the form of the subsidy on the decision about the type of job to accept and, hence, its potential effect on within-job wage growth. The subsidy is predicted to increase job turnover and to affect between-job wage growth by affecting reservation wages. We use this framework to analyze the effects of the Canadian Self-Sufficiency Project (SSP). Consistent with the theory, we find that experimentals have shorter job duration and experience faster within-job and between-job wage growth than experimentals who continued to be eligible only for Income Assistance.
Subjects:wage subsidy
job choice
JEL:J38
J23
Document Type:Working Paper
Appears in Collections:IZA Discussion Papers, Forschungsinstitut zur Zukunft der Arbeit (IZA)

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