Working Papers, Department of Economics, Aarhus School of Business, University of Aarhus
Elke J. Jahn
Do Targeted Hiring Subsidies and Profiling Techniques Reduce Unemployment?
() and Thomas Wagner
Abstract: To reduce unemployment targeted hiring subsidies for
long-term unemployed are often recommended. To explore their effect on
employment and wages, we devise a model with two types of unemployed and
two methods of search, a public employment service (PES) and random search.
The eligibility of a new match depends on the applicant’s unemployment
duration and on the method of search. The hiring subsidy raises job
destruction and extends contrary to Mortensen-Pissarides (1999, 2003) the
duration of a job search, so that equilibrium unemployment increases. Like
the subsidy, organizational reforms, which advance the search effectiveness
of the PES, crowd out the active jobseekers and reduce overall employment
as well as social welfare. Nevertheless, reforms are a visible success for
the PES and its target group, as they significantly increase the service’s
placement rate and lower the duration of a job search via the PES
Keywords: Matching model; hiring subsidy; endogenous separation rate; active labour market policy; PES; random search; (follow links to similar papers)
JEL-Codes: J41; J63; J64; J68; (follow links to similar papers)
52 pages, October 10, 2008
Before downloading any of the electronic versions below
you should read our statement on
for viewing Postscript files and the
Acrobat Reader for viewing and printing pdf files.
Full text versions of the paper:
Questions (including download problems) about the papers in this series should be directed to Helle Vinbaek Stenholt ()
Report other problems with accessing this service to Sune Karlsson ()
or Helena Lundin ().
Design by Joachim Ekebom