Abstract
This paper extends a standard labor demand model in order to study the microeconomic effects of marginal employment subsidies. The analysis emphasizes the distinction between workers and hours per worker, and investigates subsidies with respect to both quasi-fixed and variable labor costs. The policy of granting marginal employment subsidies conditional on mandatory workweek reductions, as recently practiced in several European countries, is also investigated. Additionally, the study incorporates a comparative evaluation of general and marginal employment subsidies. Copyright 1989 by Scottish Economic Society.
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