Do Long-Term Unemployed Workers Benefit from Targeted Wage Subsidies?
Article first published online: 18 OCT 2013
© 2013 German Economic Association (Verein für Socialpolitik)
German Economic Review
Volume 16, Issue 1, pages 43–64, February 2015
How to Cite
Schünemann, B., Lechner, M. and Wunsch, C. (2015), Do Long-Term Unemployed Workers Benefit from Targeted Wage Subsidies?. German Economic Review, 16: 43–64. doi: 10.1111/geer.12040
- Issue published online: 23 JAN 2015
- Article first published online: 18 OCT 2013
- Institut für Arbeitsmarkt und Berufsforschung
- IAB. Grant Number: 8104
- Wage subsidy;
- long-term unemployment;
- regression discontinuity
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.