Comparing the Effectiveness of Employment Subsidies

Merkl C, Brown AJG, Snower D (2011)


Publication Language: English

Publication Type: Journal article

Publication year: 2011

Journal

Publisher: Elsevier

Book Volume: 18

Pages Range: 169-179

Journal Issue: 2

DOI: 10.1016/j.labeco.2010.11.001

Abstract

This paper examines the implications of different types of employment subsidies for employment, welfare, and inequality. It investigates how these effects depend on what target groups the subsidies address. Our analysis focuses on policies that are “approximately welfare efficient” (AWE), i.e. 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 are not AWE. Furthermore, hiring vouchers targeted at the long-term unemployed are more effective than those targeted at low-ability workers.

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How to cite

APA:

Merkl, C., Brown, A.J.G., & Snower, D. (2011). Comparing the Effectiveness of Employment Subsidies. Labour Economics, 18(2), 169-179. https://dx.doi.org/10.1016/j.labeco.2010.11.001

MLA:

Merkl, Christian, Alessio J. G. Brown, and Dennis Snower. "Comparing the Effectiveness of Employment Subsidies." Labour Economics 18.2 (2011): 169-179.

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