Many countries have policies aimed at creating jobs in depressed areas with high unemployment rates. In standard spatial equilibrium models with perfectly competitive labor and land markets, local job creation efforts are distortionary. We develop a stylized model of frictional local labor...

The majority of enterprises in developing countries have no paid workers. Is this optimal, or the result of frictions in labor markets? We conduct an experiment providing wage subsidies to randomly chosen microenterprises in Sri Lanka. In the presence of frictions, a short-term subsidy could...

The economic convergence of American regions has greatly slowed, and rates of long-term non-employment have even been diverging. Simultaneously, the rate of non-employment for working age men has nearly tripled over the last 50 years, generating a terrible social problem that is...

The British New Deal for Young People began in January 1998. After 6 months of unemployment, 18-24 year olds are mandated to enter a `Gateway' period where they are given extensive job search assistance. If they are unable to obtain an unsubsidised job, then they can enter one of four New Deal...

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...

I review evidence on alternative labor market policies that could potentially improve economic self-sufficiency via mandating higher wages, subsidizing employment, or increasing productivity. The evidence indicates that the minimum wage is an ineffective policy to promote economic...

In the SSP Applicant Experiment, a random sample of new welfare entrants was informed that if they remained on welfare for a year they would become eligible for a generous earnings subsidy. Those who satisfied the waiting period and then left welfare and began working full time within the...

Wage subsidies to private employers have often been proposed by economists as a potentially flexible and efficient method to improve the earnings and employment of low-wage workers. This paper lays out the basic economics of wage subsidies; examines issues arising in the design of alternative...

In recent years, many states and some local governments implemented or expanded their own supplemental Earned Income Tax Credits (EITCs). The expansion of state EITCs may have stemmed in large part from wanting to provide a more generous program than the federal program, because state EITCs...

We develop a dynamic macroeconomic framework with worker heterogeneity, putty-clay adjustment frictions, and firm monopsony power to study the distributional impact of labor market policies over time. Our framework reconciles the well-known tension between low short-run and high long-run...