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Journal of Population Economics

, Volume 12, Issue 2, pp 197–213 | Cite as

Youth unemployment and government policy

  • J. Michael Orszag
  • Dennis Snower

Abstract.

Young people of working age tend to be particularly prone to labor market inefficiencies that keep their wages excessively high and their employment excessively low. These inefficiencies are usually magnified through unemployment benefit systems. This paper examines how these problems can be tackled through “employment vouchers,” i.e. hiring subsidies or tax breaks for the unemployed. It examines how vouchers to the young unemployed should differ from those to the adult unemployed. The employment vouchers considered here reduce unemployment and impose no cost on the government, since they are financed by the induced fall in government expenditures on unemployment benefits. Among other things, we find that young workers should receive lower vouchers as displacement of the old rises and as deadweight from providing vouchers to the old increases.

JEL classification: J23 J24 J31 J32 J64 
Key words: Youth unemployment employment employment subsidies adult unemployment overlapping generations models 

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Copyright information

© Springer-Verlag Berlin Heidelberg 1999

Authors and Affiliations

  • J. Michael Orszag
    • 1
  • Dennis Snower
    • 1
  1. 1.Department of Economics, Birkbeck College, University of London, London W1P 2LL, UK (e-mail: jmo@ricardo.econ.bbk.ac.uk; dsnower@econ.bbk.ac.uk)GB

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