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Contingent wage subsidy
Author(s) -
Zubrickas Robertas
Publication year - 2020
Publication title -
journal of public economic theory
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.809
H-Index - 32
eISSN - 1467-9779
pISSN - 1097-3923
DOI - 10.1111/jpet.12451
Subject(s) - subsidy , economics , wage , unemployment , incentive , pareto principle , pareto optimal , coordination failure , labour economics , microeconomics , wage bargaining , set (abstract data type) , accounts payable , macroeconomics , finance , market economy , operations management , computer science , programming language , payment
Abstract This paper proposes a policy aimed at tackling unemployment that arises from macroeconomic coordination failure. The policy offers firms wage subsidies payable only if the total number of new hires made across the economy is below a prespecified threshold. Subsidies provide incentives for firms to create jobs but the policy's goal is to generate a sufficiently large amount of employment spillovers to set off hiring complementarities taking employment beyond the threshold. Thus, subsidies are not distributed but the policy achieves a Pareto improvement. The market structure is important for policy design. Aggregative game techniques prove useful for the oligopsonistic case.