Labour market programmes and the equity-efficiency trade-off
AbstractThis paper studies optimal labour market policy in a society where differently gifted individuals can invest in training to further increase their labour market productivity and where the government seeks both efficiency and equity. Frictions in the matching process create unemployment and differently skilled workers face different levels of risk of unemployment. We show that in such an environment, training programmes that are targeted at the disadvantaged workers complement passive transfers (UI benefits), unlike general training subsidies. Combining passive subsidies with a training subsidy conditioned on the individual being unemployed (for a period) – the typical Active Labour Market Programme – creates a favourable trade-off between equity and efficiency and this encourages high spending on training.
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Bibliographic InfoArticle provided by Elsevier in its journal Journal of Macroeconomics.
Volume (Year): 33 (2011)
Issue (Month): 4 ()
Contact details of provider:
Web page: http://www.elsevier.com/locate/inca/622617
Unemployment; Efficiency; Training;
Other versions of this item:
- Filges, Trine & Kennes, John & Larsen, Birthe & Tranæs, Torben, 2006. "Labour Market Programmes and the Equity-Efficiency Trade-off," Working Papers 11-2005, Copenhagen Business School, Department of Economics.
- H00 - Public Economics - - General - - - General
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