How do COVID-19 re-hiring subsidies affect unemployment duration and incomes in Morocco? An instrumental variable approach

Abstract

This paper attempts to estimate the impact of a rehiring subsidy implemented as part of the COVID-19 crisis impact response in Morocco. Using administrative data from the National Social Security Fund, it develops the instrumental variable method to estimate the causal effect of this scheme on unemployment duration and on beneficiaries’ wages. Intended for employees who have previously received unemployment benefits, this subsidy seems to have produced contrasting effects on the beneficiaries. On one hand, it had a “disincentive” effect on their job search efforts, increasing their unemployment duration, compared to non-beneficiaries. On the other hand, it strengthened their power of bargaining and selection, leading them to choose higher paying jobs, compared to those of non-beneficiaries.