Employment Subsidies and Substitutable Skills: An Equilibrium Matching Approach

44 Pages Posted: 7 Apr 2006

See all articles by Bruno Van der Linden

Bruno Van der Linden

Université Catholique de Louvain - Institut de Recherches Economiques et Sociales; IZA Institute of Labor Economics

Gabriele Cardullo

Catholic University of Louvain (UCL) - Department of Economics

Date Written: April 2006

Abstract

The search-matching model is well suited for an equilibrium evaluation of labor market policies. When those policies are targeted on some groups, the usual juxtaposition of labor markets is however a shortcoming. There is a need for a setting where workers' productivity depends on employment levels in all markets. This paper provides such a theoretical setting. We first develop a streamlined model and then show that it can be extended to deal with interactions among various labor market and fiscal policies. Simulation results focus on the effects of employment subsidies and in-work benefits and on their interactions with the profile of unemployment benefits and with active labor market programs.

Keywords: Unemployment, search-matching equilibrium, wage bargaining, reductions of social security contributions, unemployment insurance, labor market programs

JEL Classification: E24, J3, J41, J64, J65, J68

Suggested Citation

Van der Linden, Bruno and Cardullo, Gabriele, Employment Subsidies and Substitutable Skills: An Equilibrium Matching Approach (April 2006). IZA Discussion Paper No. 2073. Available at SSRN: https://ssrn.com/abstract=895126 or http://dx.doi.org/10.2139/ssrn.895126

Bruno Van der Linden (Contact Author)

Université Catholique de Louvain - Institut de Recherches Economiques et Sociales ( email )

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

HOME PAGE: http://perso.uclouvain.be/bruno.vanderlinden/

IZA Institute of Labor Economics

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

Gabriele Cardullo

Catholic University of Louvain (UCL) - Department of Economics ( email )

Department of Economics
B1348 Louvain-la-Neuve, 1348
Belgium

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