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Title:Comparing the effectiveness of employment subsidies PDF Logo
Authors:Brown, Alessio J. G.
Merkl, Christian
Snower, Dennis J.
Issue Date:2007
Citation:[Series:] IZA discussion papers [Editor:] Forschungsinstitut zur Zukunft der Arbeit, Bonn [No.:] 2835
Series/Report no.:IZA Discussion paper series 2835
Abstract:This paper analyses theoretically and empirically how employment subsidies should be targeted. We contrast measures involving targeting workers with low incomes/abilities and targeting the unemployed under the criteria of approximate welfare efficiency (AWE). Thereby we can identify policies that (a) improve employment and welfare, (b) do not raise earnings inequality and (c) are self-financing. We construct a microfounded, dynamic model of hiring and separations and calibrate it with German data. The calibration shows that hiring vouchers can be AWE, while low-wage subsidies do not satisfy AWE. Furthermore, hiring vouchers targeted at the long-term unemployed are more effective than those targeted at low-ability workers.
Subjects:Low wage subsidy
Hiring voucher
Targeting
Employment
Unemployment
Duration
Self-financing
JEL:J23
J68
J38
J64
J24
Document Type:Working Paper
Appears in Collections:Publikationen von Forscherinnen und Forschern des IfW
IZA Discussion Papers, Forschungsinstitut zur Zukunft der Arbeit (IZA)

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