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Employment Subsidies and Substitutable Skills: An Equilibrium Matching Approach

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  • Gabriele Cardullo
  • Bruno Van der Linden

Abstract

The search-matching model is well suited for an equilibrium evaluation of labor market policies. When those policies are targeted on some groups, the usual juxtaposition of labor markets is however a shortcoming. There is a need for a setting where workers' productivity depends on employment levels in all markets. This paper provides such a theoretical setting. We first develop a streamlined model and then show that it can be extended to deal with interactions among various labor market and fiscal policies. Simulation results focus on the effects of employment susbsidies and in-work benefits and on their internactions with the profile of unemployment benefits and with active labor market programs.

Suggested Citation

  • Gabriele Cardullo & Bruno Van der Linden, 2007. "Employment Subsidies and Substitutable Skills: An Equilibrium Matching Approach," Applied Economics Quarterly (formerly: Konjunkturpolitik), Duncker & Humblot, Berlin, vol. 53(4), pages 375-404.
    • Handle: RePEc:aeq:aeqaeq:v53_y2007_i4_q4_p375-404
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    Cited by:

    1. Brown, Alessio J.G. & Merkl, Christian & Snower, Dennis J., 2011. "Comparing the effectiveness of employment subsidies," Labour Economics, Elsevier, vol. 18(2), pages 168-179, April.
    2. Jahn, Elke J. & Wagner, Thomas, 2008. "Do Targeted Hiring Subsidies and Profiling Techniques Reduce Unemployment?," IZA Discussion Papers 3768, Institute of Labor Economics (IZA).
    3. Victoria Osuna, 2009. "Should we tax overtime, subsidize the wage or subsidize employment?," Working Papers 09.03, Universidad Pablo de Olavide, Department of Economics.
    4. Belan, Pascal & Carré, Martine & Gregoir, Stéphane, 2010. "Subsidizing low-skilled jobs in a dual labor market," Labour Economics, Elsevier, vol. 17(5), pages 776-788, October.
    5. Berger, Johannes & Strohner, Ludwig, 2020. "Documentation of the PUblic Policy Model for Austria and other European countries (PUMA)," Research Papers 11, EcoAustria – Institute for Economic Research.
    6. Osuna Victoria, 2009. "Taxing Overtime or Subsidizing Employment," The B.E. Journal of Macroeconomics, De Gruyter, vol. 9(1), pages 1-28, October.
    7. Philip Schuster, 2010. "Labor Market Policy Instruments and the Role of Economic Turbulence," University of St. Gallen Department of Economics working paper series 2010 2010-29, Department of Economics, University of St. Gallen.
    8. Oskamp, Frank & Snower, Dennis J., 2006. "The effect of low-wage subsidies on skills and employment," Kiel Working Papers 1292, Kiel Institute for the World Economy (IfW Kiel).
    9. Oskamp, Frank & Snower, Dennis J., 2007. "Interactions between employment and training policies," Kiel Working Papers 1389, Kiel Institute for the World Economy (IfW Kiel).

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    More about this item

    Keywords

    search-matching equilibrium; reductions of social security contributions; labor market programs;
    All these keywords.

    JEL classification:

    • E24 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Employment; Unemployment; Wages; Intergenerational Income Distribution; Aggregate Human Capital; Aggregate Labor Productivity
    • J68 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Public Policy
    • H2 - Public Economics - - Taxation, Subsidies, and Revenue

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