NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH

Prospective Analysis of a Wage Subsidy for Cape Town Youth

James A. Levinsohn, Todd Pugatch

NBER Working Paper No. 17248
Issued in July 2011
NBER Program(s):   LS

Recognizing that a credible estimate of a wage subsidy's impact requires a model of the labor market that itself generates high unemployment in equilibrium, we estimate a structural search model that incorporates both observed heterogeneity and measurement error in wages. Using the model to examine the impact of a wage subsidy, we find that a R1000/month wage subsidy paid to employers leads to an increase of R660 in mean accepted wages and a decrease of 15 percentage points in the share of youth experiencing long-term unemployment.

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Document Object Identifier (DOI): 10.3386/w17248

Published: Levinsohn, James & Pugatch, Todd, 2014. "Prospective analysis of a wage subsidy for Cape Town youth," Journal of Development Economics, Elsevier, vol. 108(C), pages 169-183. citation courtesy of

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