This paper provides a theoretical and quantitative analysis of various types of wellknown employment subsidies. Two … important questions are addressed: (i) How should employment subsidies be targeted? (ii) How large should the subsidies be? We …) improve employment and welfare, (b) do not raise earnings inequality and (c) are self-financing. This criterion enables us to …

affects employment, wage inequality, public expenditures, and aggregate income in the low-wage sector. It is shown that a … employment depending on the subsidies’ incidence and income effects. Wage subsidies also allow a more equal income distribution …