Creating Low Skilled Jobs by Subsidising Market-Contracted Household Work

Posted: 10 Aug 2012 Last revised: 28 Feb 2018

See all articles by Tilman Brück

Tilman Brück

IGZ - Leibniz Institute of Vegetable and Ornamental Crops; ISDC - International Security and Development Center; IZA Institute of Labor Economics

John P. Haisken-DeNew

University of Melbourne - Melbourne Institute: Applied Economic & Social Research; McMaster University, Faculty of Social Sciences, Department of Economics

Klaus F. Zimmermann

Global Labor Organization (GLO); UNU-MERIT; Maastricht University, Department of Economics; Free University Berlin; University of Bonn; Centre for Economic Policy Research (CEPR); Journal of Population Economics

Multiple version iconThere are 2 versions of this paper

Date Written: 2006

Abstract

The paper analyses 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. It is found 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 labour supply, especially by highly qualified mothers.

Keywords: shadow economy, low skilled jobs, female workers, subsidies, Germany, houshold work

Suggested Citation

Brück, Tilman and Haisken-DeNew, John P. and Zimmermann, Klaus F., Creating Low Skilled Jobs by Subsidising Market-Contracted Household Work (2006). Applied Economics, Vol. 38, No. 8, 2006, Available at SSRN: https://ssrn.com/abstract=2127702

Tilman Brück (Contact Author)

IGZ - Leibniz Institute of Vegetable and Ornamental Crops ( email )

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John P. Haisken-DeNew

University of Melbourne - Melbourne Institute: Applied Economic & Social Research

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McMaster University, Faculty of Social Sciences, Department of Economics ( email )

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Klaus F. Zimmermann

Global Labor Organization (GLO) ( email )

Bonn
Germany

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UNU-MERIT ( email )

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Maastricht University, Department of Economics ( email )

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University of Bonn

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Centre for Economic Policy Research (CEPR)

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