Stick, Carrot and Skill Acquisition*

Trine Filges and Birthe Larsen

Scandinavian Journal of Economics, 2005, vol. 107, issue 3, 495-519

Abstract: 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.

Date: 2005
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https://doi.org/10.1111/j.1467-9442.2005.00420.x

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Working Paper: Stick, Carrot and Skill Acquisition (2001)
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