Labour Market Policy and the Equity-Efficiency Trade-Off
AbstractThis paper studies labour market policy in a society where differently gifted individuals can invest in training to further increase their labour market productivity. Furthermore, the government seeks both efficiency and equity. Frictions in the matching process create unemployment and differently skilled workers face different unemployment risks. We show that in such an environment, training programmes targeted to the disadvantaged workers complement passive transfers (UI benefits), unlike a general training subsidy. Combining passive subsidies with a training subsidy conditioned on individual unemployment duration – the typical Active Labour Market Programme – implies a favorable trade-off between equity and efficiency which encourages relative high spending on training.
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Bibliographic InfoPaper provided by Institute for the Study of Labor (IZA) in its series IZA Discussion Papers with number 2824.
Length: 29 pages
Date of creation: Jun 2007
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Find related papers by JEL classification:
- J6 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers
- J24 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Human Capital; Skills; Occupational Choice; Labor Productivity
- J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials
This paper has been announced in the following NEP Reports:
- NEP-ALL-2007-07-07 (All new papers)
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