Abstract

This paper studies the intended and unintended effects of discounting public transportation for the long-term unemployed (LTU) by leveraging the staggered roll-out of local subsidies in 79 districts across Germany. Combining large survey data with administrative employment records, we show that subsidizing public transport fees improves the self-reported standard of living and social participation among the LTU. On the flip side, the subsidies decelerate individuals' return into employment. These adverse employment effects arise only if subsidies are exclusive to the unemployed. If eligibility is based on an income threshold negative employment effects are absent.