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Stick, Carrot and Skill Acquisition

  • Trine Filges
  • Birthe Larsen

We evaluate the impact of specially designed youth unemployment programmes (YUPs), intended to provide young unemployed unskilled workers with skills. If unemployment among skilled workers is lower than among unskilled workers, YUPs imply that unemployment falls. However, YUPs potentially crowd out ordinary training. We set up an equilibrium matching model with endogenous skill choice and examine the impact of an increase in programme participation. We derive a condition for crowding out of ordinary training, as well as a condition for an increase in the skilled labour force and thereby reduced unemployment. The impact of YUPs on welfare and wage dispersion is also considered. Copyright The editors of the "Scandinavian Journal of Economics", 2005 .

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Article provided by Wiley Blackwell in its journal The Scandinavian Journal of Economics.

Volume (Year): 107 (2005)
Issue (Month): 3 (09)
Pages: 495-519

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Handle: RePEc:bla:scandj:v:107:y:2005:i:3:p:495-519
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  1. Fredriksson, Peter, 1997. " Economic Incentives and the Demand for Higher Education," Scandinavian Journal of Economics, Wiley Blackwell, vol. 99(1), pages 129-42, March.
  2. Larsen, Birthe, 2001. "Minimum wages, technological progress and loss of skill," European Economic Review, Elsevier, vol. 45(8), pages 1521-1544, August.
  3. Jensen, P. & Nielsen, M.S. & Rosholm, M., 1999. "The Effects of Benefits, Incentives, and Sanctions on Youth Employment," Papers 99-05, Centre for Labour Market and Social Research, Danmark-.
  4. Filges, Trine & Larsen, Birthe, 2001. "The Impact of Yputh Unemployment Policy," Working Papers 08-2001, Copenhagen Business School, Department of Economics.
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