The Effectiveness of Hiring Credits

Pierre Cahuc (1, 2, 3) , Stéphane Carcillo (4) , Thomas Le Barbanchon (5)

1 X - École polytechnique
2 ENSAE Paris - École Nationale de la Statistique et de l'Administration Économique
3 CREST - Centre de Recherche en Economie et Statistique [Bruz]
4 ECON - Département d'économie (Sciences Po)
5 CREST - Centre de Recherche en Économie et Statistique

This paper analyzes the effectiveness of hiring credits. Using comprehensive administrative data, we show that the French hiring credit, implemented during the Great Recession, had significant positive employment effects and no effects on wages. Relying on the quasi-experimental variation in labor cost triggered by the hiring credit, we estimate a structural search and matching model. Simulations of counterfactual policies show that the effectiveness of the hiring credit relied to a large extent on three features: it was nonanticipated, temporary and targeted at jobs with rigid wages. We estimate that the cost per job created by permanent hiring credits, either countercyclical or time-invariant, in an environment with flexible wages would have been much higher.

Keywords: Hiring credit; Labor demand; Search and matching model

Domains: Economics and Finance

Pierre Cahuc, Stéphane Carcillo, Thomas Le Barbanchon. The Effectiveness of Hiring Credits. 2017. ⟨hal-03393157⟩