On Labor Policies Affecting Investment in General Human Capital

Yasuhiro Sato and Hiroaki Sugiura

LABOUR, 2003, vol. 17, issue 4, 599-622

Abstract: Abstract. This paper develops a search model including workers’ investments in general human capital and investigates the effects of labor policies such as subsidies to human capital investment and unemployment benefits on the accumulation of human capital. It is shown that the equilibrium is not optimal because workers underinvest in human capital or firms open too many vacancies in comparison with the number of unemployed workers. Comparative statics show that an increase in subsidies to human capital investment adds to the number of vacancies per unemployed worker and to workers’ investments in human capital and that an increase in unemployment benefits decreases them. Finally, labor policies that remove the distortion are explored.

Date: 2003
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