The Employment Effects of Low-Wage Subsidies
Bank of Finland; CESifo (Center for Economic Studies and Ifo Institute for Economic Research)
Uppsala University - Department of Economics; IFAU - Institute for Labour Market Policy Evaluation; Government of the Republic of Finland - Government Institute for Economic Research (VATT); Institute for the Study of Labor (IZA)
May 1, 2010
CESifo Working Paper Series No. 3043
Low-wage subsidies are often proposed as a solution to the unemployment problem among the low skilled. Yet the empirical evidence on the effects of low-wage subsidies is surprisingly scarce. This paper examines the employment effects of a Finnish payroll tax subsidy scheme, which is targeted at the employers of older, full-time, low-wage workers. The system’s clear eligibility criteria open up an opportunity for a reliable estimation of the causal impacts of the subsidy, using a difference-in-difference-in-differences approach. Our results indicate that the subsidy system had no effects on the employment rate. However, it appears to have increased the probability of part-time workers obtaining full-time employment.
Number of Pages in PDF File: 33
Keywords: Low-Wage Subsidies, Employment, Social Security Contributions
JEL Classification: H24, J23, J68working papers series
Date posted: May 14, 2010
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