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The effectiveness of targeted wage subsidies for hard-to-place workers

Die Effizienz zielorientierter Lohnsubventionen für schwer vermittelbare Arbeitslose
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Jaenichen, Ursula; Stephan, Gesine

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Abstract Targeted wage subsidies paid to employers are an important element of active labour market policies in Germany. This paper uses propensity score matching to investigate their effect on the employment and unemployment rates of subsidised hard-to-place workers. In a first scenario, we estimate the average treatment effect of a subsidy on previously unemployed individuals. A second scenario analyses the effects of a subsidy on employment probabilities conditional on taking-up employment. The third scenario investigates the additional effect of a subsidy on individuals, who have participated in a short-term training measure beforehand. Summing up and in line with the literature, the results show that subsidies have a favourable effect on the employment prospects of participants.
Keywords Federal Republic of Germany; labor market policy; unemployment compensation; employment policy; program; unemployment; subsidy
Classification Labor Market Policy
Method empirical; quantitative empirical
Free Keywords Targeted wage subsidies; evaluation of labour market programmes; propensity score matching
Document language English
Publication Year 2009
Page/Pages p. 1209-1225
Journal Applied Economics (2009)
Status Postprint; peer reviewed
Licence PEER Licence Agreement (applicable only to documents from PEER project)