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α: calibrated so average coauthorship-adjusted count equals average raw count
Persistently high youth unemployment is one of the most pressing problems in South Africa. We prospectively analyze an employer wage subsidy targeted at youth, a policy recently enacted by the South African government to address the issue. Recognizing that a credible estimate of the policy's impact requires a model of the labor market that itself generates high unemployment in equilibrium, we estimate a structural search model that incorporates both observed heterogeneity and measurement error in wages. Using the model to simulate the policy, we find that a R1000/month wage subsidy paid to employers leads to an increase of R596 in mean accepted wages and a decrease of 12 percentage points in the share of youth experiencing long-term unemployment.