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Hiring subsidies and temporary work agencies

Author

Listed:
  • Natalia Bermúdez-Barrezueta

    (UNIVERSITE CATHOLIQUE DE LOUVAIN, Institut de Recherches Economiques et Sociales (IRES))

  • Sam Desiere

    (Ghent University)

  • Giulia Tarullo

    (UNIVERSITE CATHOLIQUE DE LOUVAIN, Institut de Recherches Economiques et Sociales (IRES))

Abstract

This paper evaluates a hiring subsidy for lower-educated youths in Flanders (Belgium) that reduced labour costs by approximately 13% for a period of two years, starting in 2016. Using a donut Regression Discontinuity Design, we find no evidence that the subsidy improved the job finding rate of eligible job seekers in 2016-19, a period marked by a tight labour market. We then investigate the role of temporary work agencies, which disproportionately employ the target group and obtain 25% to 34% of the subsidies. Using Difference-in-Differences regressions, we demonstrate that agencies did not raise wages of eligible agency workers in response to the policy. Remarkably, despite a 3.3% labour cost reduction, full-time equivalent employment of eligible workers in these agencies decreased by 9.2% over the three years following the reform. Our findings highlight how an active labour market policy affects agency employment.

Suggested Citation

  • Natalia Bermúdez-Barrezueta & Sam Desiere & Giulia Tarullo, 2025. "Hiring subsidies and temporary work agencies," LIDAM Discussion Papers IRES 2025003, Université catholique de Louvain, Institut de Recherches Economiques et Sociales (IRES).
  • Handle: RePEc:ctl:louvir:2025003
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    References listed on IDEAS

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    More about this item

    Keywords

    hiring subsidy; temporary work agencies; youth employment; ALMP;
    All these keywords.

    JEL classification:

    • J08 - Labor and Demographic Economics - - General - - - Labor Economics Policies
    • J23 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Labor Demand
    • J53 - Labor and Demographic Economics - - Labor-Management Relations, Trade Unions, and Collective Bargaining - - - Labor-Management Relations; Industrial Jurisprudence
    • J64 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Unemployment: Models, Duration, Incidence, and Job Search
    • J68 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Public Policy

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