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The Impact of Labour Subsidies on Total Factor Productivity and Profit per Employee by Pontus Mattsson is a Economics, Econometrics and Finance article available to read on EtoBox.

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Subsidising targeted labour groups is a common intervention to prevent long-term unemployment. Lower expected firm productivity is the motivation for subsidising labour, but all research, with one exception, focuses on other effects while some investigate the total factor productivity (TFP) effects of capital subsidies. This study combines methods that, to the best of my knowledge, have not previously been used together to determine the impacts of labour subsidies on TFP. Further, profit per employee is included as a second outcome. Coarsened exact matching (CEM) is performed on the key variables; difference-in-differences (DiD) is then applied to the matched data. It is found that firms employing workers with wage subsidies experience negative and significant effects on both TFP and profit per employee. Heterogeneity is, however, observed; the only sector to show a deficit in both TFP and profit per employee is wholesale. During the second year with a subsidy, a negative impact can be observed on the profit per employee but not on TFP. The policy conclusion from the analysis is that subsidising individuals from particular groups is necessary to induce firms to hire workers from th

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Author

Pontus Mattsson

Publisher

Elsevier BV

Published

2019

Language

EN

Field

Economics, Econometrics and Finance (Social Sciences)