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The effectiveness of employment vouchers: a simple approach

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  • Orszag, Jonathan Michael
  • Snower, Dennis J.

Abstract

This paper explores the optimal design of subsidies for hiring unemployed workers ('employment vouchers' for short) in the context of a dynamic model of the labor market. Focusing on the short-term and long-term effects of the vouchers on employment and unemployment, the analysis shows how the optimal policy depends on the rates of hiring and firing, and on the problems of displacement and deadweight. It also examines the roles of the government budget constraint and of the level of unemployment benefits in optimal policy design. We calibrate the model and evaluate the effectiveness of employment vouchers in reducing unemployment for a wide range of feasible parameters.

Suggested Citation

  • Orszag, Jonathan Michael & Snower, Dennis J., 2000. "The effectiveness of employment vouchers: a simple approach," Open Access Publications from Kiel Institute for the World Economy 2519, Kiel Institute for the World Economy (IfW Kiel).
    • Handle: RePEc:zbw:ifwkie:2519
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    File URL: https://www.econstor.eu/bitstream/10419/2519/1/macro.pdf
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    References listed on IDEAS

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    1. Layard, Richard & Nickell, Stephen & Jackman, Richard, 2005. "Unemployment: Macroeconomic Performance and the Labour Market," OUP Catalogue, Oxford University Press, number 9780199279173, December.
    2. Alan B. Krueger, 1988. "The Determinants of Queues for Federal Jobs," ILR Review, Cornell University, ILR School, vol. 41(4), pages 567-581, July.
    3. Burgess, Simon & Rees, Hedley, 1994. "Lifetime Jobs and Transient Jobs: Job Tenure in Britain 1975-91," CEPR Discussion Papers 1098, C.E.P.R. Discussion Papers.
    4. Burgess, Simon & Pacelli, Lia & Rees, Hedley, 1997. "Job Tenure and Labour Market Regulation: A Comparison of Britain and Italy using Micro Data," CEPR Discussion Papers 1712, C.E.P.R. Discussion Papers.
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    Cited by:

    1. Adam, Antonis & Moutos, Thomas, 2011. "A politico-economic analysis of minimum wages and wage subsidies," Economics Letters, Elsevier, vol. 110(3), pages 171-173, March.
    2. Andreas Knabe & Ronnie Schöb & Joachim Weimann, 2006. "Marginal Employment Subsidization: A New Concept and a Reappraisal," Kyklos, Wiley Blackwell, vol. 59(4), pages 557-577, November.
    3. Brown, Alessio J.G. & Orszag, J. Michael & Snower, Dennis J., 2008. "Unemployment accounts and employment incentives," European Journal of Political Economy, Elsevier, vol. 24(3), pages 587-604, September.
    4. 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.
    5. Fehn, Rainer, 2002. "Arbeitsmarktflexibilisierung und Arbeitslosigkeit," Discussion Paper Series 54, Julius Maximilian University of Würzburg, Chair of Economic Order and Social Policy.
    6. Michael Lechner, 2002. "Eine wirkungsorientierte aktive Arbeitsmarktpolitik in Deutschland und der Schweiz: Eine Vision – zwei Realitäten," Perspektiven der Wirtschaftspolitik, Verein für Socialpolitik, vol. 3(2), pages 159-174, May.
    7. Orszag, J. Michael & Snower, Dennis J., 2002. "Incapacity benefits and employment policy," Labour Economics, Elsevier, vol. 9(5), pages 631-641, November.
    8. Berthold, Norbert & von Berchem, Sascha, 2003. "Die Sozialhilfe zwischen Effizienz und Gerechtigkeit: wie kann der Spagat gelingen?," Discussion Paper Series 62, Julius Maximilian University of Würzburg, Chair of Economic Order and Social Policy.

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