Vouchers for the long-term unemployed: a simulation analysis with MIMIC

For this purpose, CPB's applied general equilibrium model is adapted to include the time structure of unemployment. In particular, the model of search and selection strategies of firms and the unemployed and the matching process between vacancies and unemployment is extended.

The simulation results show that the voucher scheme is rather effective in reducing long-term unemployment. The effects, however, are not as large as Snower suggests.