Designing Inclusion: Tools to Raise Low-end Pay and Employment in Private Enterprise

Cover......Page 1
Half-title......Page 3
Title......Page 5
Copyright......Page 6
Contents......Page 7
Figures......Page 9
Tables......Page 11
Contributors......Page 13
Introduction......Page 15
Inclusion of the less advantaged......Page 16
Causes of the lost ground......Page 18
Political economy......Page 20
Recent policy responses......Page 25
This volume’s studies......Page 27
References......Page 28
1 Low-wage employment subsidies in a labor-turnover model of the “natural rate”......Page 30
1 Neoclassical theory......Page 33
2 Basic features of the economy in modern equilibrium theory......Page 37
3 Open-economy incidence of tax subsidy schemes......Page 39
3.1 Long-run effects of the flat subsidy......Page 41
3.2 Short-run effects of the flat subsidy......Page 44
3.3 Long-run effects of the graduated subsidy......Page 45
3.4 Long-run effects of a hiring subsidy......Page 47
4 Closed economy incidence......Page 48
5 The case of rising marginal training cost......Page 51
6 Concluding remarks......Page 52
Appendix......Page 55
References......Page 56
1 Introduction......Page 58
2.1 Basic concepts......Page 59
2.2 Job creation and job destruction......Page 62
2.3 Wage determination......Page 67
3.1 Market equilibrium......Page 69
3.2 Comparative static results......Page 72
4 Computation experiments......Page 73
4.1 Functional forms and baseline parameters......Page 74
4.2 Outcomes......Page 75
4.3 Marginal effects of an employment subsidy......Page 77
4.4 Marginal effects of a hiring subsidy......Page 80
4.5 A self-financing employment subsidy and wage tax......Page 81
5 Conclusions and a future research agenda......Page 83
References......Page 86
1 Introduction......Page 88
2 Models of wage subsidies and skill formation......Page 93
2.1 Specifications of skill formation equations......Page 94
2.2 Reconciling the two models of skill formation......Page 97
2.4 Schooling......Page 102
3.1 A description of the EITC program......Page 103
3.2 The qualifying population......Page 104
3.3 Allowing for endogenous tax-subsidy rates......Page 107
4 A multi-period model......Page 109
4.1 On-the-job training......Page 110
4.2 Learning-by-doing......Page 113
5 Grounding the model in data......Page 116
6 Simulating the effects of the EITC......Page 119
6.1 On-the-job training......Page 120
6.2 Learning-by-doing......Page 129
6.3 Accounting for lifecycle eligibility owing to children......Page 136
8 Conclusions......Page 137
Appendix 3B: non-concavity of the reward function in the Ben Porath model in the presence of an EITC program......Page 140
Appendix 3C: solution algorithm for individual optimization problem......Page 141
Appendix 3D: parameter estimates......Page 142
References......Page 143
1 Introduction......Page 145
2 Underlying ideas......Page 146
3 The dynamic structure of the model......Page 150
4 A specific analytical example......Page 152
5.1 Dead-end workers......Page 157
5.2 Upwardly mobile workers......Page 162
6 Optimal subsidy policy......Page 164
7 Conclusion......Page 166
Appendix 4A: a closed-form analysis of the basic consumer model......Page 167
Appendix 4B: the fraction of long-term unemployed......Page 171
Appendix 4C: microfoundations of the hiring and separation functions......Page 172
References......Page 173
Index......Page 175