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Varieties of Employment Subsidy Design: Theory and Evidence from Across Europe


Employment subsidy programs have experienced considerable expansion across Europe in recent decades. To date, most studies analyzing this policy shift have assumed that these programs are largely equivalent in terms of their designs, effects, and explanations. In contrast, this article argues that employment subsidies are best understood as versatile multi-purpose tools that can be used as means to rather different distributional ends. Using Multiple Correspondence Analysis to explore novel data from hundreds of employment subsidy programs across Europe, this article develops a new typology based on two overarching trade-offs. The typology highlights that employment subsidies may be designed to counteract as well as to sustain insider/outsider divides in the labor market, and that they may be designed to tackle either structural or cyclical labor market problems. In a first empirical evaluation of the typology, programs with different designs are found to vary systematically in terms of distributional outcomes and starting conditions.

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Journal of Social Policy
  • ISSN: 0047-2794
  • EISSN: 1469-7823
  • URL: /core/journals/journal-of-social-policy
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