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Type Working Paper - NBER Working Paper Series Working Paper 17248
Title Prospective analysis of a wage subsidy for Cape Town youth
Issue 17248
Publication (Day/Month/Year) 2011
Page numbers 1-37
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 examine the impact of a wage subsidy, we find that a R1000/month wage subsidy paid to employers leads to an increase of R660 in mean accepted wages and a decrease of 15 percentage points in the share of youth experiencing long-term unemployment.

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