Fiscal stimuli in the form of job creation subsidies |
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| Institution: | 1. International University of Japan, 777 Kokusai-cho, Minami-Uonuma-shi, Niigata 949-7277, Japan;2. The University of Tokyo, 7-3-1 Hongo, Bunkyo-ku, Tokyo 113-0033, Japan;1. Aston Business School, Aston University, Birmingham B4 7ET, United Kingdom;2. School of Business and Economics, Loughborough University, Leicestershire LE11 3TU, United Kingdom;3. Cardiff Business School, Cardiff University, Aberconway Building, Colum Drive, Cardiff CF10 3EU, United Kingdom;1. Sino-French Int. Joint Lab. of Automation and Signals (LaFCAS), Automation School, Nanjing University of Science and Technology, Nanjing 210094, China;2. Laboratories of LaFCAS and LAGIS, Lille University of Science and Technology, France;1. European Central Bank, DG Research, Germany;2. European Central Bank, DG Economics, Germany;1. Institute of Geographic Science and Natural Resource Research, Chinese Academy of Sciences, Beijing 100101, China;2. College of Resource, Environment and Tourism, The Capital Normal University, Beijing 100048, China;3. Key Laboratory of Continental Collision and Plateau Uplift, Institute of Tibetan Plateau Research, Chinese Academy of Sciences, Beijing 100101, China |
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| Abstract: | This paper examines the effects of fiscal stimuli in the form of job creation subsidies in a DSGE model with search friction and endogenous job separation. We consider two types of job creation subsidies: a subsidy for the cost of posting vacancies and a hiring subsidy. This paper finds that the effects of job creation subsides on unemployment differ between models with and without endogenous job separation. While a positive job creation subsidy shock lowers unemployment in a model without endogenous job separation, it increases unemployment in a model with endogenous job separation. We also find that while qualitatively the effects of a vacancy cost subsidy on the economy are similar to those of a hiring subsidy, quantitatively they are different. |
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| Keywords: | Fiscal policy Hiring subsidy Unemployment Search and matching |
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