I use job tenure as a measure of job specific skills, i.e. I assume that individuals who have been at their job for longer have greater job specific skills. The ENOE collects information on job tenure through the amplified questionnaire. Unfortunately, this questionnaire is only available once a year for most years and for 2009 it was applied in the first quarter, when the wage subsidy program was recently launched. Figure 9a plots the number of individuals working in eligible industry in a job with access to IMSS, separately for those with two or less years of job tenure and those with more than two years of tenure. Figure 9b displays the corresponding numbers for ineligible industries. Both figures show that the number of employees with high job tenure remained stable from 2008 to 2009. In fact, the drop in employment during the crisis seems to be entirely driven by individuals with low job tenure, who presumably have the lowest levels of job specific skills, both in eligible and ineligible industries. That is, even in industries that were not eligible for the wage subsidy program firms decided to lay off employees with the lowest job tenure, thereby preserving job specific skills.<sup>13</sup> Evidence from the ENOE data does thus not support the hypothesis that the wage subsidy program caused firms to keep employees with job specific skills to a greater extent than they would have in the absence of the program. This evidence needs to be interpreted with caution due to the issues with matching ENOE data to eligible and ineligible IMSS industries, as mentioned above, and also due to the fact that tenure data only exists for the first quarter of the program. However, it does suggest that the program may have worked through a different channel than preserving job‐specific skills.

Another potential explanation for the effects measured in this paper is that it was not the firing restrictions that allowed employment to recover faster after the crisis, but rather the payment of the subsidy funds itself. These funds may have provided liquidity for hiring back workers, thereby allowing firms to take advantage of market opportunities at a time when other funding sources were scarce. In fact, the time when employment started to increase again in eligible industries (mid‐2009, as shown in figure 4) coincided with the time when the subsidy funds started to be paid out.

In fact, the lack of a statistically significant effect of the wage subsidy program on employment during the duration of the program suggests that the firing restrictions imposed by the program were not binding. That is, firms who received the subsidy would not have fired more than one third of their workforce as a percentage of the drop in sales they experienced during the crisis, even in the absence of the program. It is possible that the program would have had a positive effect on employment during its duration if the firing restrictions had been more stringent. However, another design issue is that since the subsidy was typically paid many months after firms were supposed to limit layoffs, ex‐ante firms may have faced uncertainty as to whether they would really receive the funds. That is, some firms who ended up laying off more workers than specified by the program may not have changed their behavior due to a lack of certainty about the program.

> 13 Another reason of laying off employees with low job tenure is that government mandated severance payments increase with number of years on the job.

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