preliminary- not for citation

This paper evaluates the joint inuence of hiring subsidies and training subsidies which address a serious labor market problem: high unemployment of low-skilled. In particular, the paper deals with the question whether there are complementarities between both policies: Is the e¤ect of each policy on welfare and employment greater when it is implemented in con-junction with the other policy? For this purpose, we construct a simple, dynamic model of hiring decisions, derived from mi-crofoundations. Workers are heterogenous with respect to their productivity. The model is calibrated with German data. The simulation shows that for reasonable parameter values there are complementarities between training and hiring subsidies. However, in the presence of the government budget constraint the result changes