Long-Term Effects of Hiring Subsidies for Unemployed Youths - Beware of Spillovers

Luxembourg Institute of Socio-Economic Research (LISER) Working Paper Series n°2022-09

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See all articles by Andrea Albanese

Andrea Albanese

Luxembourg Institute of Socio-Economic Research (LISER); Ghent University; IZA Institute of Labor Economics

Bart Cockx

Ghent University - Sherppa - Faculty of Economics and Business Administration; Institute for the Study of Labor (IZA); CESifo (Center for Economic Studies and Ifo Institute); IRES, Université Catholique de Louvain

Muriel Dejemeppe

Catholic University of Louvain (UCL)

Date Written: October 28, 2022

Abstract

We use (donut) regression discontinuity design and difference-in-differences estimators
to estimate the impact of a one-shot hiring subsidy targeted at low-educated unemployed
youths during the Great Recession recovery in Belgium. The subsidy increases job-finding
in the private sector by 10 percentage points within one year of unemployment. Six years
later, high school graduates accumulated 2.8 quarters more private employment. However,
because they substitute private for public and self-employment, overall employment does
not increase but is still better paid. For high school dropouts, no persistent gains emerge.
Moreover, the neighboring attraction pole of Luxembourg induces a complete deadweight
near the border.

Keywords: Hiring subsidies, youth unemployment, cross-border employment, regression discontinuity design, difference-in-differences, spillover effects, displacement

JEL Classification: C32, J08, J23, J24, J64, J68, J61

Suggested Citation

Albanese, Andrea and Cockx, Bart L. W. and Dejemeppe, Muriel, Long-Term Effects of Hiring Subsidies for Unemployed Youths - Beware of Spillovers (October 28, 2022). Luxembourg Institute of Socio-Economic Research (LISER) Working Paper Series n°2022-09, Available at SSRN: https://ssrn.com/abstract=

Andrea Albanese (Contact Author)

Luxembourg Institute of Socio-Economic Research (LISER)

11 Porte des Sciences
Esch-sur-Alzette, L-4366
Luxembourg

Ghent University ( email )

Ghent, B-9000
Belgium

IZA Institute of Labor Economics ( email )

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

Bart L. W. Cockx

Ghent University - Sherppa - Faculty of Economics and Business Administration ( email )

Ghent, B-9000
Belgium

Institute for the Study of Labor (IZA)

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

CESifo (Center for Economic Studies and Ifo Institute)

Poschinger Str. 5
Munich, DE-81679
Germany

IRES, Université Catholique de Louvain

Place Montesquieu, 3
Louvain-la-Neuve
Belgium

Muriel Dejemeppe

Catholic University of Louvain (UCL) ( email )

Place Montesquieu, 3
Louvain-la-Neuve, 1348
Belgium

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