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Retraining and Long-Term Unemployment in a Model of Unlearning by not Doing

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Author Info
Melvyn G. Coles () (Economics Department, University of Essex, UK)
Adrian Masters () (Department of Economics, University of Essex, UK)

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Abstract

This paper develops a dynamically consistent model of search, matching and bargaining when worker skills decline while unemployed. Long-term unemployment emerges as an endogenous phenomenon. Even with constant returns to matching, multiple Pareto rankable equilibria are possible. It suggests that the fundamental market failure in matching models is that of incomplete markets - current traders cannot influence the decisions of previous traders in the market. Policies to address long-term unemployment are best directed toward prevention (e.g. vacancy creation subsidies) rather than cure (e.g. retraining subsidies).

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Publisher Info
Paper provided by Institute for Labour Research in its series ILR working papers with number 018.

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Length: 30
Date of creation: Jan 1998
Date of revision:
Handle: RePEc:esl:ilrdps:018

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Postal: Institute for Labour Research University of Essex, Wivenhoe Park Colchester, Essex CO4 3SQ UK
Phone: 44-1206-872957
Fax: 44-1206-872724
Web page: http://www.essex.ac.uk/ilr

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Postal: Institute for Labour Research University of Essex, Wivenhoe Park Colchester, Essex CO4 3SQ UK
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Web: http://www.essex.ac.uk/ilr/discuss/index.htm

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Related research
Keywords: Long-term Unemployment; Skill decay; Training;

Other versions of this item:

Find related papers by JEL classification:
J41 - Labor and Demographic Economics - - Particular Labor Markets - - - Labor Contracts
J24 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Human Capital; Skills; Occupational Choice; Labor Productivity

Cited by:
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  1. Bruno, VAN DER LINDEN, 2003. "Unemployment insurance and training in an equilibrium matching model with heterogeneous agents," Discussion Papers (IRES - Institut de Recherches Economiques et Sociales) 2003001, Université catholique de Louvain, Institut de Recherches Economiques et Sociales (IRES). [Downloadable!]
    Other versions:
  2. Felix Reichling, 2005. "Retraining the Unemployed in a Matching Model with Turbulence," Macroeconomics 0506012, EconWPA. [Downloadable!]
  3. Birk, Angela, 2001. "Qualification-Mismatch and Long-Term Unemployment in a Growth-Matching Model," Discussion Paper Series 26181, Hamburg Institute of International Economics. [Downloadable!]
  4. Sascha O. Becker, 2005. "Introducing Time-to-Educate in a Job Search Model," IZA Discussion Papers 1801, Institute for the Study of Labor (IZA). [Downloadable!]
    Other versions:
  5. Jeong-Joon Lee, 2005. "Observational Equivalence between the Malmquist Index and the Solow Residual for the G-7 Countries," CIRJE F-Series CIRJE-F-354, CIRJE, Faculty of Economics, University of Tokyo. [Downloadable!]
  6. Birk, Angela, 2001. "Long-Term Unemployment and Subsidizing Vacancies in a Growth-Matching Model," Discussion Paper Series 26194, Hamburg Institute of International Economics. [Downloadable!]
  7. Birk, Angela, 2002. "Long-Term Unemployment, Technical Progress and Capital Mobility in an Open Growth-Matching Model," Discussion Paper Series 26206, Hamburg Institute of International Economics. [Downloadable!]
  8. Roger Bjørnstad, 2001. "Learned Helplessness, Discouraged Workers, and Multiple Unemployment Equilibria in a Search Model," Discussion Papers 303, Research Department of Statistics Norway. [Downloadable!]
  9. Melvyn G. Coles & Adrian Masters, 2000. "Duration Dependent UI Payments in a Model of Equilibrium Unemployment," ILR working papers 059, Institute for Labour Research. [Downloadable!]
  10. Julen Esteban-Pretel & Elisa Faraglia, 2005. "Monetary Shocks in a Model with Loss of Skills," CIRJE F-Series CIRJE-F-380, CIRJE, Faculty of Economics, University of Tokyo. [Downloadable!]
    Other versions:
  11. Julen Esteba-Pretel, 2005. "The Effects of the Loss of Skills on Unemployment Fluctuations," CIRJE F-Series CIRJE-F-371, CIRJE, Faculty of Economics, University of Tokyo. [Downloadable!]
  12. Julen Esteban-Pretel, 2005. "Loss of Skill and Retraining in a Matching Model," CIRJE F-Series CIRJE-F-353, CIRJE, Faculty of Economics, University of Tokyo. [Downloadable!]
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