Do employment subsidies work? Evidence from regionally targeted subsidies in Turkey
Betcherman,G. Meltem Daysal,N. Pages,C.
Betcherman,G.
Meltem Daysal,N.
Pages,C.
Abstract
This paper studies the effects on registered employment and number of registered establishments of two employment subsidy schemes in Turkey. We implement a difference-in-differences methodology to construct appropriate counterfactuals for the covered provinces. Our findings suggest that both subsidy programs did lead to significant net increases in registered jobs in eligible provinces (5%–13% for the first program and 11%–15% for the second). However, the cost of the actual job creation was high because of substantial deadweight losses, particularly for the first program (47% and 78%). Because of better design features, the second subsidy program had lower, though still significant, deadweight losses (27%–46%). Although constrained by data availability, the evidence suggests that the dominant effect of subsidies was to increase social security registration of firms and workers rather than boosting total employment and economic activity. This supports the theory that in countries with weak enforcement institutions, high labor taxes on low-wage workers may lead to substantial incentives for firms and workers to operate informally.
Description
Date
2010
Journal Title
Journal ISSN
Volume Title
Publisher
Research Projects
Organizational Units
Journal Issue
Keywords
SDG 8 - Decent Work and Economic Growth
Citation
Betcherman, G, Meltem Daysal, N & Pages, C 2010, 'Do employment subsidies work? Evidence from regionally targeted subsidies in Turkey', Labour Economics, vol. 17, no. 4, pp. 710-722. < http://dx.doi.org/10.1016/j.labeco.2009.12.002 >