Abstract
This paper proposes a policy aimed at tackling unemployment that arises from macroeconomic coordination failure. The policy offers firms wage subsidies payable only if the total number of new hires made across the economy is below a prespecified threshold. Subsidies provide incentives for firms to create jobs but the policy's goal is to generate a sufficiently large amount of employment spillovers to set off hiring complementarities taking employment beyond the threshold. Thus, subsidies are not distributed but the policy achieves a Pareto improvement. The market structure is important for policy design. Aggregative game techniques prove useful for the oligopsonistic case.
Original language | English |
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Pages (from-to) | 1105-1119 |
Number of pages | 15 |
Journal | Journal of Public Economic Theory |
Volume | 22 |
Issue number | 4 |
Early online date | 11 Jun 2020 |
DOIs | |
Publication status | Published - 24 Jul 2020 |
Bibliographical note
Funding Information:I would like to thank Daron Acemoglu, Bernardo Guimaraes, and two anonymous referees for useful comments and discussions.
Publisher Copyright:
© 2020 The Authors. Journal of Public Economic Theory published by Wiley Periodicals LLC
ASJC Scopus subject areas
- Finance
- Sociology and Political Science
- Economics and Econometrics
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Robertas Zubrickas
- Department of Economics - Professor
- Microeconomic Theory
Person: Research & Teaching, Core staff