Discussion Paper Details

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Title: A Macro Theory of Employment Vouchers

Author(s): Mike Orszag and Dennis J. Snower

Publication Date: March 1996

Keyword(s): Employment Policy, Government Budget Constraint and Unemployment Benefits

Programme Area(s): Human Resources

Abstract: This paper explores the optimal design of subsidies for hiring unemployed workers (?employment vouchers? for short) in the context of a simple macroeconomic model of the labour market. Focusing on the short-term and long-term effects of the vouchers on employment and unemployment, the analysis shows how the optimal policy depends on the rates of hiring and firing, and on the problems of displacement and deadweight. It also examines the roles of the government budget constraint and of the level of unemployment benefits in optimal policy design.

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Bibliographic Reference

Orszag, M and Snower, D. 1996. 'A Macro Theory of Employment Vouchers'. London, Centre for Economic Policy Research.