Hiring subsidies, job creation and job destruction

We quantify the effects of hiring subsidies using the model of Mortensen and Pissarides (2003). The job creation effect can be large in a weak labor market. However, in the long-run, subsidies raise the wage and equilibrium unemployment.

► The paper quantifies the effects of hiring subsidies. ► The positive job creation effect can be much larger in a weak labor market. ► In the long-run, hiring subsidies raise the wage and equilibrium unemployment.