Evaluation of the Australian Wage Subsidy Special Youth ...

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Table 1.3 collects together some recent European employment effects found in evaluation
of wage subsidies. The direction and significance of the estimated effect of the program
is presented only, as the scope of this limited overview precludes reference to the details
of the various programs, their targeting, and the empirical methods employed. As for the
reviews already summarized, there is variation in the effects even when the size of the
effect is not considered. Some are not statistically significant, some are negative and
others are positive. Once more, the uncertainty remains of whether wage subsidies
provide employment gains empirically.
However, it is unlikely that any overview or literature review can account for the
extraordinary amount of variation that could be the source of these varying evaluation
results. A meta-analysis might generate some conclusions. Meta-analysis, in particular
meta-regression analysis, has developed in the past two decades into one of the most
important instruments for the synthesis of quantified evaluation findings. In metaanalysis,
the dependent variable is a standardized measure of effect estimated in each of a
set of studies that is representative of a field of inquiry. This dependent variable may then
be used in two very different ways. One approach, which is dominant in medicine and
psychology, focuses chiefly upon the derivation of an appropriately weighted average
effect from the set of studies. Meta-analysis, in this approach, is employed to extract a
superior estimate of what is regarded as the true effect. The other approach, which is
more appropriate to economic evaluations, is primarily concerned with explaining the
nature and sources of the between-studies variation in the estimates. This variation is
regarded as representing genuine heterogeneity in impacts. This would be the more
appropriate analysis for generating conclusions in this context. Examples are Stanley and
Jarrell (1998), who examined estimates of the gender pay gap in the USA, and
Ashenfelter et al. (1999) who examined rates of return to schooling from several
industrialised countries. Although a useful proposal for future research, a meta-analysis is
however not within the range of this research.
However, as the economic environment within a country can set up a unique context, the
theory of wage subsidies does not predict that wage subsidies will work in all these