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http://dspace.mediu.edu.my:8181/xmlui/handle/10419/3874| Title: | The effect of low-wage subsidies on skills and employment |
| Keywords: | I29 J38 J21 J24 J31 ddc:330 Low-wage subsidies Employment Unemployment Skill acquisition Training incentives Lohnsubvention Niedriglohn Wirtschaftspolitische Wirkungsanalyse Ungelernte Arbeitskräfte Beschäftigungseffekt Bildungsverhalten Ökonomischer Anreiz Bildungsinvestition Qualifikation Theorie Deutschland |
| Issue Date: | 16-Oct-2013 |
| Publisher: | Kiel Institute for the World Economy (IfW) Kiel |
| Description: | We explore the far-reaching implications of low-wage subsidies on aggregate employment. Low-wage subsidies have three important effects. First, they promote employment of unskilled workers (who tend to be the ones who earn low wages). Second, by raising the payoff of unskilled work relative to skilled work, low-wage subsidies reduce the incentive to become skilled, so that there are more unskilled workers associated with a relatively low employment rate. Third, the government budget constraint has to be taken into account, which is supposed to cause an additional tax burden for the skilled workers. This amplifies the negative effect of low-wage subsidies on the incentive to acquire human capital. Thus, the first effect on the one hand and the second and third effect on the other hand pull in opposite directions in terms of employment. This paper presents a theoretical model of the labor market in which these effects can be analyzed. We then calibrate the model with respect to the German labor market to shed light on the relative strengths of these effects and thereby assess the degree to which low-wage subsidies encourage or discourage employment. |
| URI: | http://koha.mediu.edu.my:8181/xmlui/handle/10419/3874 |
| Other Identifiers: | http://hdl.handle.net/10419/3874 ppn:517476533 |
| Appears in Collections: | EconStor |
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