Optimal labor subsidies and industrial-development in ireland

Abstract

This paper calculates the employment subsidies implicit in the principal financial incentives provided by the Irish Government to foster industrial employment. These subsidies are compared with estimates of optimal employment subsidies, which take explicit account of the economy's social objectives and resource constraints. The paper concludes that, on average, the actual subsidies paid lie within the range of optimal subsidies, although in the case of individual projects, they may exceed the optimal. Finally, attention is drawn to the need for greater consistency between the levels of employment subsidies provided for the industrial sector and of social assistance paid to the unemployed.