IDEAS home Printed from https://ideas.repec.org/a/eee/labeco/v27y2014icp16-29.html
   My bibliography  Save this article

Turbulence, training and unemployment

Author

Listed:
  • Belan, Pascal
  • Chéron, Arnaud

Abstract

In this paper, we develop a matching model where firms invest in transferable human capital. Workers are endowed with heterogeneous abilities and, as a result of economic turbulence, can undergo a depreciation of their human capital during unemployment spells. Firms take inefficient training decision because they do not fully valuate the additional productivity of the workers in future jobs (poaching externality) and the additional employability after separation (unemployment externality). Higher turbulence reduces the former externality and increases the latter. It then generates some opposite forces on the gap between efficient and equilibrium training, so that it does not necessarily require higher training subsidies. The general equilibrium analysis shows that, even if the Hosios condition holds, unemployment is higher than its efficient level, which requires an additional instrument such as ability-specific employment subsidies. We lastly run some computational experiments based on the French economy to illustrate these results: optimal subsidies are found to increase with turbulence, and the total subsidy turns out to be decreasing with wages, with an efficient rate that is reduced by three from the lowest to the highest wages.

Suggested Citation

  • Belan, Pascal & Chéron, Arnaud, 2014. "Turbulence, training and unemployment," Labour Economics, Elsevier, vol. 27(C), pages 16-29.
  • Handle: RePEc:eee:labeco:v:27:y:2014:i:c:p:16-29
    DOI: 10.1016/j.labeco.2014.01.001
    as

    Download full text from publisher

    File URL: http://www.sciencedirect.com/science/article/pii/S0927537114000037
    Download Restriction: Full text for ScienceDirect subscribers only

    As the access to this document is restricted, you may want to search for a different version of it.

    References listed on IDEAS

    as
    1. Ljungqvist, Lars & Sargent, Thomas J., 2007. "Understanding European unemployment with a representative family model," Journal of Monetary Economics, Elsevier, vol. 54(8), pages 2180-2204, November.
    2. Wasmer, Etienne, 2002. "Interpreting Europe and US labor markets differences: the specificity of human capital investments," Arbetsrapport 2003:9, Institute for Futures Studies.
    3. Jacobson, Louis S & LaLonde, Robert J & Sullivan, Daniel G, 1993. "Earnings Losses of Displaced Workers," American Economic Review, American Economic Association, vol. 83(4), pages 685-709, September.
    4. Daron Acemoglu & Jorn-Steffen Pischke, 1999. "The Structure of Wages and Investment in General Training," Journal of Political Economy, University of Chicago Press, vol. 107(3), pages 539-572, June.
    5. Lars Ljungqvist & Thomas J. Sargent, 1998. "The European Unemployment Dilemma," Journal of Political Economy, University of Chicago Press, vol. 106(3), pages 514-550, June.
    6. Louis S. Jacobson & Robert J. LaLonde & Daniel G. Sullivan, 1993. "Long-term earnings losses of high-seniority displaced workers," Economic Perspectives, Federal Reserve Bank of Chicago, issue Nov, pages 2-20.
    7. Cheron, A., 2005. "Efficient v.s. equilibrium unemployment with match-specific costs," Economics Letters, Elsevier, vol. 88(2), pages 176-183, August.
    8. Picchio, Matteo & van Ours, Jan C., 2011. "Market imperfections and firm-sponsored training," Labour Economics, Elsevier, vol. 18(5), pages 712-722, October.
    9. Acemoglu, Daron & Pischke, Jorn-Steffen, 1999. "Beyond Becker: Training in Imperfect Labour Markets," Economic Journal, Royal Economic Society, vol. 109(453), pages 112-142, February.
    10. Decreuse, Bruno & Granier, Pierre, 2013. "Unemployment benefits, job protection, and the nature of educational investment," Labour Economics, Elsevier, vol. 23(C), pages 20-29.
    11. Tripier, Fabien, 2011. "The efficiency of training and hiring with intrafirm bargaining," Labour Economics, Elsevier, vol. 18(4), pages 527-538, August.
    12. Wooseok Ok & Peter Tergeist, 2003. "Improving Workers' Skills: Analytical Evidence and the Role of the Social Partners," OECD Social, Employment and Migration Working Papers 10, OECD Publishing.
    13. Hairault, Jean-Olivier & Le Barbanchon, Thomas & Sopraseuth, Thepthida, 2015. "The cyclicality of the separation and job finding rates in France," European Economic Review, Elsevier, vol. 76(C), pages 60-84.
    14. Wouter J. den Haan & Christian Haefke & Garey Ramey, 2005. "Turbulence And Unemployment In A Job Matching Model," Journal of the European Economic Association, MIT Press, vol. 3(6), pages 1360-1385, December.
    15. Lars Ljungqvist & Thomas J. Sargent, 2004. "European Unemployment and Turbulence Revisited in a Matching Model," Journal of the European Economic Association, MIT Press, vol. 2(2-3), pages 456-468, 04/05.
    16. Daron Acemoglu, 1997. "Training and Innovation in an Imperfect Labour Market," Review of Economic Studies, Oxford University Press, vol. 64(3), pages 445-464.
    17. Henry S. Farber, 2005. "What do we know about job loss in the United States? evidence from the displaced workers survey, 1984-2004," Economic Perspectives, Federal Reserve Bank of Chicago, issue Q II, pages 13-28.
    18. Bassanini, Andrea & Booth, Alison L. & Brunello, Giorgio & De Paola, Maria & Leuven, Edwin, 2005. "Workplace Training in Europe," IZA Discussion Papers 1640, Institute of Labor Economics (IZA).
    19. James M. Malcomson, 1997. "Contracts, Hold-Up, and Labor Markets," Journal of Economic Literature, American Economic Association, vol. 35(4), pages 1916-1957, December.
    20. Acemoglu, Daron & Shimer, Robert, 1999. "Holdups and Efficiency with Search Frictions," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 40(4), pages 827-849, November.
    21. Cunha, Flavio & Heckman, James J. & Lochner, Lance, 2006. "Interpreting the Evidence on Life Cycle Skill Formation," Handbook of the Economics of Education, Elsevier.
    22. Henry S. Farber, 2005. "What do we know about Job Loss in the United States? Evidence from the Displaced Workers Survey, 1984-2004," Working Papers 877, Princeton University, Department of Economics, Industrial Relations Section..
    23. repec:spo:wpecon:info:hdl:2441/8904 is not listed on IDEAS
    24. Stevens, Margaret, 1994. "A Theoretical Model of On-the-Job Training with Imperfect Competition," Oxford Economic Papers, Oxford University Press, vol. 46(4), pages 537-562, October.
    25. Malcomson, J.M., 1997. "Contracts, hold-up and labor markets," Discussion Paper Series In Economics And Econometrics 9703, Economics Division, School of Social Sciences, University of Southampton.
    26. Brunello, Giorgio & Comi, Simona Lorena & Sonedda, Daniela, 2012. "Training subsidies and the wage returns to continuing vocational training," Labour Economics, Elsevier, vol. 19(3), pages 361-372.
    27. Stevens, Margaret, 1994. "An Investment Model for the Supply of Training by Employers," Economic Journal, Royal Economic Society, vol. 104(424), pages 556-570, May.
    28. Christopher A. Pissarides, 1992. "Loss of Skill During Unemployment and the Persistence of Employment Shocks," The Quarterly Journal of Economics, Oxford University Press, vol. 107(4), pages 1371-1391.
    29. Edwin Leuven, 2005. "The Economics of Private Sector Training: A Survey of the Literature," Journal of Economic Surveys, Wiley Blackwell, vol. 19(1), pages 91-111, February.
    30. Ljungqvist, Lars & Sargent, Thomas J., 2007. "Understanding European unemployment with matching and search-island models," Journal of Monetary Economics, Elsevier, vol. 54(8), pages 2139-2179, November.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Anthony Terriau, 2018. "Occupational mobility and vocational training over the life cycle," Working Papers halshs-01878925, HAL.
    2. repec:eee:labeco:v:50:y:2018:i:c:p:32-44 is not listed on IDEAS
    3. Erygit Pinar & Cura Serkan & Zungun Deniz & Ortanca Murat, 2014. "Econometric Evaluation Of The Relationship Economic Growth And Unemployment In Eu & Turkey," Annals of Faculty of Economics, University of Oradea, Faculty of Economics, vol. 1(1), pages 452-462, July.
    4. Arnaud Cheron & Anthony Terriau, 2015. "Search frictions and (in)efficient vocational training over the life-cycle," TEPP Working Paper 2015-09, TEPP.
    5. repec:eee:touman:v:51:y:2015:i:c:p:35-48 is not listed on IDEAS

    More about this item

    Keywords

    Training; Training subsidies; Unemployment; Matching;

    JEL classification:

    • 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

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:eee:labeco:v:27:y:2014:i:c:p:16-29. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Dana Niculescu). General contact details of provider: http://www.elsevier.com/locate/labeco .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.