Working Paper: CEPR ID: DP930
Authors: Dennis J. Snower
Abstract: This paper explores the implications of giving unemployed people -- particularly the long-term unemployed -- the opportunity to use part of their unemployment benefits to provide employment vouchers to the firms that hire them. The vouchers would depend positively on unemployment duration and training. The paper argues that this policy would give unemployed people and their potential employers an expanded domain of choices in the labour market and thereby reduce the market failures generated and amplified by unemployment benefit systems. A simple theoretical model is presented, followed by preliminary empirical estimates which suggest that the proposed policy may have significant potential in a number of OECD countries.
Keywords: unemployment; employment subsidies; unemployment benefit systems
JEL Codes: J23; J24; J31; J32; J64
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Unemployment duration and training (J64) | employment vouchers (J68) |
| employment vouchers (J68) | firms hiring the unemployed (J68) |
| longer unemployment durations (J65) | larger vouchers (I22) |
| larger vouchers (I22) | incentivizing firms to hire the unemployed (J68) |
| employment vouchers (J68) | lowering labor costs for employers (J39) |
| employment vouchers (J68) | increasing wage offers for employees (J31) |
| government sharing the cost of unemployment support with firms (J65) | reduction in unemployment rates (J68) |
| Benefit Transfer Programme (BTP) (I38) | no significant impact on wage inflation (F66) |