Working Paper: CEPR ID: DP12537
Authors: Pierre Cahuc; Stéphane Carcillo; Thomas Le Barbanchon
Abstract: This paper analyzes the effectiveness of hiring credits. Using comprehensive administrative data, we show that the French hiring credit, implemented during the Great Recession, had significant positive employment effects and no effects on wages. Relying on the quasi-experimental variation in labor cost triggered by the hiring credit, we estimate a structural search and matching model. Simulations of counterfactual policies show that the effectiveness of the hiring credit relied to a large extent on three features: it was non-anticipated, temporary and targeted at jobs with rigid wages. We estimate that the cost per job created by permanent hiring credits, either countercyclical or time-invariant, in an environment with flexible wages would have been much higher.
Keywords: hiring credit; labor demand; search and matching model
JEL Codes: C31; C93; J6
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| specific characteristics of the program (C88) | cost per job created (J68) |
| French hiring credit (J32) | employment growth rate of targeted firms (L26) |
| French hiring credit (J32) | low-wage jobs hiring (J68) |
| French hiring credit (J32) | wage increases (J38) |
| French hiring credit (J32) | equilibrium effects (D50) |
| temporary and non-anticipated nature of hiring credit (J68) | effectiveness of hiring credit (J68) |