The Effectiveness of Hiring Credits

93 Pages Posted: 2 Jan 2018

See all articles by Pierre Cahuc

Pierre Cahuc

Ecole Polytechnique, Paris

Stéphane Carcillo

Organisation for Economic Co-operation and Development (OECD); Sciences Po; IZA

Thomas Le Barbanchon

Bocconi University

Date Written: December 2017

Abstract

This paper analyzes the effectiveness of hiring credits. Using comprehensive administrative data, we show that the French hiring credit, implemented during the Great Recession, had significant positive employment effects and no effects on wages. Relying on the quasi-experimental variation in labor cost triggered by the hiring credit, we estimate a structural search and matching model. Simulations of counterfactual policies show that the effectiveness of the hiring credit relied to a large extent on three features: it was non-anticipated, temporary and targeted at jobs with rigid wages. We estimate that the cost per job created by permanent hiring credits, either countercyclical or time-invariant, in an environment with flexible wages would have been much higher.

Keywords: Hiring credit, labor demand, search and matching model

JEL Classification: C31, C93, J6

Suggested Citation

Cahuc, Pierre and Carcillo, Stephane and Le Barbanchon, Thomas, The Effectiveness of Hiring Credits (December 2017). CEPR Discussion Paper No. DP12537, Available at SSRN: https://ssrn.com/abstract=3095587

Pierre Cahuc (Contact Author)

Ecole Polytechnique, Paris ( email )

1 rue Descartes
Paris, 75005
France

Stephane Carcillo

Organisation for Economic Co-operation and Development (OECD) ( email )

2 rue Andre Pascal
Paris Cedex 16, 75775
France

Sciences Po ( email )

28 rue des Saints peres
Paris, 75007
France

IZA ( email )

Thomas Le Barbanchon

Bocconi University ( email )

Via Sarfatti, 25
Milan, MI 20136
Italy

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