Creating low skilled jobs by subsidising market-contracted household work

Arbeitspapier

We analyze the determinants of household work contracted in the German shadow economy. The German socio-economic household panel, which enumerates casual domestic employment, is used to estimate the demand for such household work. The regressors include regional wage rates, household income and several control variables for household composition. We find that the demand for household work in the shadow economy is very income elastic. This suggests that targeted wage subsidies, linked to household work agencies, would be very effective in raising the legal demand for domestic help. A wage subsidy of 50% of wage costs could thus establish up to 500,000 new jobs for previously unemployed or non-working low skilled workers. The net fiscal costs of such a scheme are about 6.200 Euro per full-time job. In addition, society benefits from more law enforcement and from a raised female labor supply, especially by highly qualified mothers.

Object Details

• Language: Englisch

References and Relationships

• Bibliographic citation: Series: DIW Discussion Papers ; No. 387

Classification and Topics

• Classification: Wirtschaft ; Household Production and Intrahousehold Allocation ; Personal Income and Other Nonbusiness Taxes and Subsidies; includes inheritance and gift taxes ; Labor Demand ; Illegal Behavior and the Enforcement of Law
• Subject: labor demand ; wage subsidy ; household services ; low skilled unemployment ; shadow economy ; GSOEP ; Hauspersonal ; Schwarzarbeit ; Lohnsubvention ; Ungelernte Arbeitskräfte ; Arbeitsnachfrage ; Wirtschaftspolitische Wirkungsanalyse ; Deutschland

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): Zimmermann, Klaus F. ; Haisken-DeNew, John P. ; Brück, Tilman
• Event: Veröffentlichung
• (who): Deutsches Institut für Wirtschaftsforschung (DIW)
• (where): Berlin
• (when): 2003

Further information

• Handle: http://hdl.handle.net/10419/18149
• Last update: 10.03.2025, 11:42 AM CET