Can Wage Subsidies Boost Employment in the Wake of an Economic Crisis? Evidence from Mexico

Can Wage Subsidies Boost Employment in the Wake of an Economic Crisis? Evidence from Mexico

This paper measures the employment effect of a program in Mexico that granted firms wage subsidies during the recent economic crisis. I use monthly administrative data at the industry level, along with Euclidean distance matching to construct groups of eligible and ineligible durable goods manufactu...

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Bibliographic Details
Main Author: Bruhn, Miriam
Format: Journal Article
Published: Taylor and Francis 2020
Subjects:
WAGE SUBSIDY
EMPLOYMENT
ECONOMIC SHOCK
FIRM INCENTIVES
Online Access:http://hdl.handle.net/10986/34409
id okr-10986-34409
recordtype oai_dc
spelling okr-10986-344092021-05-25T09:49:12Z Can Wage Subsidies Boost Employment in the Wake of an Economic Crisis? Evidence from Mexico Bruhn, Miriam WAGE SUBSIDY EMPLOYMENT ECONOMIC SHOCK FIRM INCENTIVES This paper measures the employment effect of a program in Mexico that granted firms wage subsidies during the recent economic crisis. I use monthly administrative data at the industry level, along with Euclidean distance matching to construct groups of eligible and ineligible durable goods manufacturing industries that display statistically identical preprogram 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. The size of the effect increases to 18 per cent after the program ended and the results indicate that employment after the program recovered faster in eligible industries than in ineligible industries. Additional analysis suggests that the program did not incentivize firms to retain workers with job-specific skills as originally intended. Instead, the payment of subsidy funds, which only happened towards the end of the program, seems to have provided liquidity for hiring back workers. 2020-09-01T19:20:10Z 2020-09-01T19:20:10Z 2020-01-31 Journal Article The Journal of Development Studies 0022-0388 http://hdl.handle.net/10986/34409 CC BY-NC-ND 3.0 IGO http://creativecommons.org/licenses/by-nc-nd/3.0/igo World Bank Taylor and Francis Publications & Research Publications & Research :: Journal Article Latin America & Caribbean Mexico
repository_type Digital Repository
institution_category Foreign Institution
institution Digital Repositories
building World Bank Open Knowledge Repository
collection World Bank
topic WAGE SUBSIDY
EMPLOYMENT
ECONOMIC SHOCK
FIRM INCENTIVES
spellingShingle WAGE SUBSIDY
EMPLOYMENT
ECONOMIC SHOCK
FIRM INCENTIVES
Bruhn, Miriam
Can Wage Subsidies Boost Employment in the Wake of an Economic Crisis? Evidence from Mexico
geographic_facet Latin America & Caribbean
Mexico
description This paper measures the employment effect of a program in Mexico that granted firms wage subsidies during the recent economic crisis. I use monthly administrative data at the industry level, along with Euclidean distance matching to construct groups of eligible and ineligible durable goods manufacturing industries that display statistically identical preprogram 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. The size of the effect increases to 18 per cent after the program ended and the results indicate that employment after the program recovered faster in eligible industries than in ineligible industries. Additional analysis suggests that the program did not incentivize firms to retain workers with job-specific skills as originally intended. Instead, the payment of subsidy funds, which only happened towards the end of the program, seems to have provided liquidity for hiring back workers.
format Journal Article
author Bruhn, Miriam
author_facet Bruhn, Miriam
author_sort Bruhn, Miriam
title Can Wage Subsidies Boost Employment in the Wake of an Economic Crisis? Evidence from Mexico
title_short Can Wage Subsidies Boost Employment in the Wake of an Economic Crisis? Evidence from Mexico
title_full Can Wage Subsidies Boost Employment in the Wake of an Economic Crisis? Evidence from Mexico
title_fullStr Can Wage Subsidies Boost Employment in the Wake of an Economic Crisis? Evidence from Mexico
title_full_unstemmed Can Wage Subsidies Boost Employment in the Wake of an Economic Crisis? Evidence from Mexico
title_sort can wage subsidies boost employment in the wake of an economic crisis? evidence from mexico
publisher Taylor and Francis
publishDate 2020
url http://hdl.handle.net/10986/34409
_version_ 1764480839856422912

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