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How long and how much? Learning about the design of wage subsidies from policy discontinuities

Author

Listed:
  • Sjögren, Anna

    (IFAU - Institute for Evaluation of Labour Market and Education Policy)

  • Vikström, Johan

    (IFAU - Institute for Evaluation of Labour Market and Education Policy)

Abstract

Employment and wage subsidies are used to combat long-term unemployment, yet there is little research to guide the design of such programs. Discontinuities in the design and implementation of wage subsidies under the Swedish New Start Jobs-policy allow us to study effects of both subsidy rate and subsidy duration. We find that doubling of the subsidy rate has a substantial impact on job finding rates but that doubled subsidy duration has no such effect. We find the opposite pattern when we study the effects on the probability of staying employed for those who find subsidized employment. Interestingly, the positive employment effect of doubling the subsidy duration persists after the expiry of the employment subsidies.

Suggested Citation

  • Sjögren, Anna & Vikström, Johan, 2013. "How long and how much? Learning about the design of wage subsidies from policy discontinuities," Working Paper Series 2013:18, IFAU - Institute for Evaluation of Labour Market and Education Policy.
    • Handle: RePEc:hhs:ifauwp:2013_018
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    Cited by:

    1. Alessio Brown & Johannes Koettl, 2015. "Active labor market programs - employment gain or fiscal drain?," IZA Journal of Labor Economics, Springer;Forschungsinstitut zur Zukunft der Arbeit GmbH (IZA), vol. 4(1), pages 1-36, December.

    More about this item

    Keywords

    Wage-subsidies; subsidy duration; duration; subsidy rate; policy design; long-term unemployment;
    All these keywords.

    JEL classification:

    • J08 - Labor and Demographic Economics - - General - - - Labor Economics Policies
    • 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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