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Do Long-Term Unemployed Workers Benefit from Targeted Wage Subsidies?

We evaluate a wage subsidy program that is targeted at long-term unemployed workers in Germany. We use an alternative identification procedure compared to empirical studies conducted so far. Exploiting the particular program regulations and large administrative data we estimate the impact of program availability using a regression discontinuity framework. Our results suggest no significant impact of the availability of the subsidy on labor market outcomes of the target group. Even though our analysis lacks some statistical power, our findings do not support the substantial positive effects obtained from matching studies. As our approach does not require observability of all drivers of selection, previous empirical studies justifying government expenditures on wage subsidies based on matching methods should be reconsidered.

Authors
Benjamin Sch√ľnemann
Michael Lechner
Conny Wunsch
Country
Germany
Publication Year
2016
Ranges
Intervention
Intervention Start Year
2000
Intervention End Year
2001
Evaluation
Evaluation Start Year
2000
Evaluation End Year
2002
Policy field
Employment incentives
Private sector employment incentives
Target group
Labour market status
Long term unemployed
Unemployed (All cat.)
Details
Funding Source
Other
Outcome Variable
Employment status
Data Source
Administrative
Evaluation Method
DID
RDD