Do employment subsidies work? Evidence from regionally targeted subsidies in Turkey

G. Betcherman, N. Meltem Daysal, C. Pages

Research output: Contribution to journalArticleScientificpeer-review

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.
Original languageEnglish
Pages (from-to)710-722
JournalLabour Economics
Volume17
Issue number4
Publication statusPublished - 2010

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Employment subsidies
Subsidies
Turkey
Workers
Deadweight loss
Social security
Wages
Methodology
Registration
Difference-in-differences
Labor tax
Incentives
Job creation
Enforcement
Economic activity
Boosting
Costs

Cite this

Betcherman, G., Meltem Daysal, N., & Pages, C. (2010). Do employment subsidies work? Evidence from regionally targeted subsidies in Turkey. Labour Economics, 17(4), 710-722.
Betcherman, G. ; Meltem Daysal, N. ; Pages, C. / Do employment subsidies work? Evidence from regionally targeted subsidies in Turkey. In: Labour Economics. 2010 ; Vol. 17, No. 4. pp. 710-722.
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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.

Do employment subsidies work? Evidence from regionally targeted subsidies in Turkey. / Betcherman, G.; Meltem Daysal, N.; Pages, C.

In: Labour Economics, Vol. 17, No. 4, 2010, p. 710-722.

Research output: Contribution to journalArticleScientificpeer-review

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