Creating Low Skilled Jobs by Subsidizing Market-Contracted Household Work
32 Pages Posted: 12 Jan 2004
Date Written: December 2003
Abstract
We analyze the determinants of household work contracted in the German shadow economy. The German socio-economic household panel, which enumerates casual domestic employment, is used to estimate the demand for such household work. The regressors include regional wage rates, household income and several control variables for household composition. We find that the demand for household work in the shadow economy is very income elastic. This suggests that targeted wage subsidies, linked to household work agencies, would be very effective in raising the legal demand for domestic help. A wage subsidy of 50% of wage costs could thus establish up to 500,000 new jobs for previously unemployed or non-working low skilled workers. The net fiscal costs of such a scheme are about 6.200 Euro per full-time job. In addition, society benefits from more law enforcement and from a raised female labor supply, especially by highly qualified mothers.
Keywords: labor demand, wage subsidy, household services, low skilled unemployment, shadow economy, GSOEP
JEL Classification: D13, H24, J23, K42
Suggested Citation: Suggested Citation
Do you have negative results from your research you’d like to share?
Recommended Papers
-
Population, Technology, and Growth: From the Malthusian Regime to the Demographic Transition
By Oded Galor and David N. Weil
-
By Oded Galor and David N. Weil
-
The Gender Gap, Fertility and Growth
By Oded Galor and David N. Weil
-
The Gender Gap, Fertility, and Growth
By Oded Galor and David N. Weil
-
By Gary D. Hansen and Edward C. Prescott
-
Natural Selection and the Origin of Economic Growth
By Oded Galor and Omer Moav
-
Natural Selection and the Origin of Economic Growth
By Oded Galor and Omer Moav
-
From Stagnation to Growth: Unified Growth Theory
By Oded Galor
-
From Stagnation to Growth: Unified Growth Theory
By Oded Galor
-
From Physical to Human Capital Accumulation: Inequality in the Process of Development
By Oded Galor and Omer Moav