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

Frédéric Gavrel, Isabelle Lebon and Therese Rebiere

Economic Modelling, 2016, vol. 54, issue C, 545-562

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.

Keywords: Formal education; Learning-by-doing; Market efficiency; On-the-job search; Search unemployment (search for similar items in EconPapers)
JEL-codes: H21 I20 J21 J64 J68 (search for similar items in EconPapers)
Date: 2016
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

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Working Paper: Formal education versus learning-by-doing: On the labor market efficiency of educational choices (2016)
Working Paper: Formal education versus learning-by-doing: On the labor market efficiency of educational choices (2013)
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Persistent link: https://EconPapers.repec.org/RePEc:eee:ecmode:v:54:y:2016:i:c:p:545-562

DOI: 10.1016/j.econmod.2016.01.006

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