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Formal education versus learning-by-doing: On the labor market efficiency of educational choices

Author

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  • Gavrel, Frédéric
  • Lebon, Isabelle
  • Rebière, Thérèse

Abstract

Educational choices are studied in a two-sectors search-and-matching model where qualifications are required for access to good jobs. Qualifications can be acquired either before entering the labor market through formal education, or through learning-by-doing in a low-skill job. Spontaneously, the economy creates too many high-skill jobs and accordingly individuals devote too much effort to formal education. However, educational effort alone becomes insufficient when the rate of creation of these high-skill jobs is reduced to its optimal level. In conclusion, we show that an efficient policy would be to subsidize both education and low-skill firms whose workers quit when obtaining a job in the high-skill sector, both elements financed by a tax on high-skill firms.

Suggested Citation

  • Gavrel, Frédéric & Lebon, Isabelle & Rebière, Thérèse, 2016. "Formal education versus learning-by-doing: On the labor market efficiency of educational choices," Economic Modelling, Elsevier, vol. 54(C), pages 545-562.
  • Handle: RePEc:eee:ecmode:v:54:y:2016:i:c:p:545-562
    DOI: 10.1016/j.econmod.2016.01.006
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    References listed on IDEAS

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    Cited by:

    1. repec:gam:jsusta:v:10:y:2018:i:5:p:1466-:d:145079 is not listed on IDEAS
    2. Beladi, Hamid & Sinha, Chaitali & Kar, Saibal, 2016. "To educate or not to educate: Impact of public policies in developing countries," Economic Modelling, Elsevier, vol. 56(C), pages 94-101.

    More about this item

    Keywords

    Formal education; Learning-by-doing; Market efficiency; On-the-job search; Search unemployment;

    JEL classification:

    • H21 - Public Economics - - Taxation, Subsidies, and Revenue - - - Efficiency; Optimal Taxation
    • I20 - Health, Education, and Welfare - - Education - - - General
    • J21 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Labor Force and Employment, Size, and Structure
    • J64 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Unemployment: Models, Duration, Incidence, and Job Search
    • J68 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Public Policy

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