Can Wage Subsidies Boost Employment in the Wake of an Economic Crisis? : Evidence from Mexico
The rise in unemployment during an economic crisis poses a significant concern to policy makers. This paper measures the effect of a program in Mexico that granted firms in certain industries wage subsidies if they decided to keep their workers ins...
| Main Author: | |
|---|---|
| Language: | English en_US |
| Published: |
World Bank, Washington, DC
2016
|
| Subjects: | |
| Online Access: | http://documents.worldbank.org/curated/en/2016/03/26085106/can-wage-subsidies-boost-employment-wake-economic-crisis-evidence-mexico http://hdl.handle.net/10986/24149 |
| Summary: | The rise in unemployment during an
economic crisis poses a significant concern to policy
makers. This paper measures the effect of a program in
Mexico that granted firms in certain industries wage
subsidies if they decided to keep their workers instead of
letting them go during the recent economic crisis. The
analysis uses monthly administrative data on employment at
the industry level, along with propensity score matching to
construct groups of eligible and ineligible durable goods
manufacturing industries that display statistically
identical pre-program trends in employment.
Difference-in-difference results show a positive but not
statistically significant effect of the wage subsidies on
employment during the program’s eight-month duration,
ranging from 5.7 to 13.2 percent in magnitude, depending on
the specification. The size of the effect increases to 24
percent after the program ended and the results indicate
that employment after the program recovered faster in
eligible industries than in ineligible industries. |
|---|