Authors	Hujer, R. and Caliendo, M.
Year	2003
Reference	Quarterly Journal of Economic Research / Vierteljahreshefte zur Wirtschaftsforschung, 72(1), 109-123, Berlin
Keywords	Wage Subsidies, Threefold Evaluation, Deadweight Losses, Labour Demand
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Abstract	Wage subsidies are seen as a suitable and efficient method to increase the demand for low-skilled workers and enhance their employment and earnings prospects. Although on the one hand the importance of these measures as an instrument of active labour market policies in Germany is increasing, they have also been criticised. Considering human capital theories, the aspect of further training is lacking, but more importantly the possible occurrence of deadweight losses, substitution and displacement effects is one major reason for criticism. These possible effects counteract the hoped-for positive impact of wage subsidies and are usually hard to measure. In our paper we suggest a threefold evaluation strategy, which first of all examines the effect of the subsidy on the participating employee on a micro-economic level. Following that, we focus on the labour demand in order to determine the deadweight losses and substitution effects within the single firm before analysing the effects on a macroeconomic level. A complete empirical evaluation of wage subsidies in Germany has not been undertaken so far as the required data are not available yet. As soon as that will be the case, a detailed assessment on all three mentioned levels can be carried out.