|
EconStor >
Institut für Weltwirtschaft (IfW), Kiel >
Kieler Arbeitspapiere, IfW >
Please use this identifier to cite or link to this item:
http://hdl.handle.net/10419/3874
|
| | |
| Title: | | The effect of low-wage subsidies on skills and employment  |
| Authors: | | Oskamp, Frank Snower, Dennis J. |
| Issue Date: | | 2006 |
| Series/Report no.: | | Kieler Arbeitspapiere 1292 |
| Abstract: | | We explore the far-reaching implications of low-wage subsidies on aggregate employment. Low-wage subsidies have three important effects. First, they promote employment of unskilled workers (who tend to be the ones who earn low wages). Second, by raising the payoff of unskilled work relative to skilled work, low-wage subsidies reduce the incentive to become skilled, so that there are more unskilled workers associated with a relatively low employment rate. Third, the government budget constraint has to be taken into account, which is supposed to cause an additional tax burden for the skilled workers. This amplifies the negative effect of low-wage subsidies on the incentive to acquire human capital. Thus, the first effect on the one hand and the second and third effect on the other hand pull in opposite directions in terms of employment. This paper presents a theoretical model of the labor market in which these effects can be analyzed. We then calibrate the model with respect to the German labor market to shed light on the relative strengths of these effects and thereby assess the degree to which low-wage subsidies encourage or discourage employment. |
| Subjects: | | Low-wage subsidies Employment Unemployment Skill acquisition Training incentives |
| JEL: | | I29 J38 J21 J24 J31 |
| Document Type: | | Working Paper |
| Appears in Collections: | | Publikationen von Forscherinnen und Forschern des IfW Economists Online Kieler Arbeitspapiere, IfW
|
| Files in This Item:
| |
| File |
Description |
Size | Format |
| kap1292.pdf | | 261.84 kB | Adobe PDF |
|
| No. of Downloads:
| |
| last Month |
last 3 Month |
total |
|
|
|
|
|
| |
| | |
Download bibliographical data as:
BibTeX
|
| |
Share on:http://hdl.handle.net/10419/3874
|
Items in EconStor are protected by copyright, with all rights reserved, unless otherwise indicated.
|