Marginal employment subsidization: a new concept and a reappraisal

Arbeitspapier

In this paper, we attempt to renew the interest in marginal employment subsidies. Such subsidies are paid only for a firm's additional employment exceeding some reference level and create larger employment stimuli at lower fiscal costs than general wage subsidies for all workers. If the hiring of a new employee also entails subsidizing an incumbent worker (double marginal subsidization), the replacement of regular paid workers by outsourcing employment to newly established firms - a standard critique of marginal employment subsidies - can be avoided. This additional subsidy reduces the incentive to crowd out regular employment and results in even larger employment effects. Applying the subsidy scheme to the low-skill labor market in Germany, we show that employment can be substantially increased without imposing additional fiscal burden.

Object Details

• Language: Englisch

References and Relationships

• Bibliographic citation: Series: CESifo Working Paper ; No. 1707

Classification and Topics

• Classification: Wirtschaft ; Wages, Compensation, and Labor Costs: Public Policy ; Mobility, Unemployment, and Vacancies: Public Policy ; Business Taxes and Subsidies including sales and value-added (VAT)
• Subject: Lohnsubvention ; Arbeitsnachfrage ; Arbeitslosigkeit ; Beschäftigungseffekt ; Kosten-Nutzen-Analyse ; Theorie ; Deutschland

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): Knabe, Andreas ; Schöb, Ronnie ; Weimann, Joachim
• Event: Veröffentlichung
• (who): Center for Economic Studies and ifo Institute (CESifo)
• (where): Munich
• (when): 2006

Further information

• Handle: http://hdl.handle.net/10419/25752
• Last update: 10.03.2025, 11:44 AM CET