Employer search and employment subsidies

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Abstract:

In this paper insights into the literature on employment subsidy evaluation and that on employer search are merged to explore uncharted territory: the firm and job characteristics leading to deadweight loss in employment subsidy schemes. A model is developed which integrates various arguments found in the existing employer search literature. Using a survey of Dutch firms for 1999, the model predictions are confirmed. The richness of the data set enables one to construct some measures of deadweight loss which are new to the existing literature. It turns out that firms which experience low screening costs (large firms), firms that forego substantial production due to unfilled jobs (vacancies for full-time jobs) and firms operating in slack labour market conditions cause significantly more deadweight loss.

Document Type: Research Article

DOI: http://dx.doi.org/10.1080/00036840500218745

Affiliations: 1: Centre of Full Employment and Equity, University of Newcastle, 2308 NSW, Callaghan, Australia 2: Department of Economics and CofFEE Europe, University of Maastricht, PO Box 616, 6200 MD, Maastricht, The Netherlands

Publication date: July 10, 2006

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