Reference : Job additionality and deadweight spending in perfectly competitive industries
Scientific journals : Article
Business & economic sciences : Economic systems & public economics
Job additionality and deadweight spending in perfectly competitive industries
Picard, Pierre M mailto [University of Luxembourg > Faculty of Law, Economics and Finance (FDEF) > Center for Research in Economic Analysis (CREA) > ; University of Manchester > School Of Economic Studies]
Journal of Public Economics
Elsevier Science
Yes (verified by ORBilu)
[en] Employment subsidies ; Contract ; Regulation
[en] This paper links the old literature on employment subsidies with the current theories of contract and regulation. One important source of inefficiency of employment subsidies is non-additional employment and deadweight spending which occur when private firms receive a subsidy for jobs that would have been created without the subsidy. We identify the asymmetry of information between the government and the private firm as the source of these problems. When the government proposes optimal incentive contracts to promote employment, we show that all employment creations are additional and that the deadweight spending is equal to the information rent, which may be null when firms’ types are discrete.

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