The Employment Effects of Low-Wage Subsidies

Journal of Public Economics 97, 49-60. DOI: 10.1016/j.jpubeco.2012.09.007

Posted: 22 Aug 2014

See all articles by Jukka Pirttila

Jukka Pirttila

United Nations - World Institute for Development Economics Research (UNU/WIDER); Tampere University of Technology

Kristiina Huttunen

Uppsala University

Roope Uusitalo

Uppsala University - Department of Economics; IFAU - Institute for Labour Market Policy Evaluation; Government of the Republic of Finland - VATT Institute for Economic Research; IZA Institute of Labor Economics

Multiple version iconThere are 3 versions of this paper

Date Written: January 2013

Abstract

Low-wage subsidies are often proposed as a solution to the unemployment problem among the low skilled but the empirical evidence on their effects is still 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 scheme. Our results indicate that the subsidy system had no effect on the employment rate or wages of the eligible groups, but it increased slightly working hours among those already at work.

Keywords: H24, J23, J68

JEL Classification: Low-wage subsidies, Employment, Social security contributions

Suggested Citation

Pirttila, Jukka and Huttunen, Kristiina and Uusitalo, Roope, The Employment Effects of Low-Wage Subsidies (January 2013). Journal of Public Economics 97, 49-60. DOI: 10.1016/j.jpubeco.2012.09.007. Available at SSRN: https://ssrn.com/abstract=2484360

Jukka Pirttila (Contact Author)

United Nations - World Institute for Development Economics Research (UNU/WIDER) ( email )

Katajanokanlaituri 6B
Helsinki, FIN-00160
Finland

Tampere University of Technology ( email )

P.O. 541, Korkeakoulunkatu 8 (Festia building)
Tampere, FI-33101
Finland

Kristiina Huttunen

Uppsala University ( email )

Box 513
Uppsala, 751 20
Sweden

Roope Uusitalo

Uppsala University - Department of Economics ( email )

Box 513
SE-75120 Uppsala
Sweden

IFAU - Institute for Labour Market Policy Evaluation

Box 513
751 20 Uppsala
Sweden

Government of the Republic of Finland - VATT Institute for Economic Research

Arkadiankatu 7
P.O Box 1279
Helsinki, FIN-00531
Finland

IZA Institute of Labor Economics

P.O. Box 7240
Bonn, D-53072
Germany

Register to save articles to
your library

Register

Paper statistics

Abstract Views
230
PlumX Metrics