How Effective are Hiring Subsidies to Reduce Long-Term Unemployment Among Prime-Aged Jobseekers? Evidence from Belgium

Abstract

Hiring subsidies are widely used to create (stable) employment for the long-term unemployed. This paper exploits the abolition of a hiring subsidy targeted at long-term unemployed jobseekers over 45 years of age in Belgium to evaluate its effectiveness in the short and medium run. Based on a triple difference methodology the hiring subsidy is shown to increase the job finding rate by 13% without any evidence of spill-over effects. This effect is driven by a positive effect on individuals with at least a bachelor's degree. However, the hiring subsidy mainly created temporary short-lived employment: eligible jobseekers were not more likely to find employment that lasted at least twelve consecutive months than ineligible jobseekers.

Keywords: hiring subsidies, long-term unemployment, prime-aged jobseekers, triple difference, temporary help agencies

JEL Classification: H22, J08, J18, J23, J38, J64, J65, J68