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Life cycle training and equilibrium unemployment

Arnaud Chéron and Anthony Terriau ()

Labour Economics, 2018, vol. 50, issue C, 32-44

Abstract: This paper examines life cycle vocational training investments in the context of a model with search frictions that features skill obsolescence and heterogenous agents. We shed light on some age-dependent externalities. On the one hand, this implies that firms can increase too far from retirement the selection into training programs with respect to what it would be optimal to do. On the other hand, endogenous job creation leads unemployed job finding probabilities to be too low at equilibrium, and also decreasing at the end of the working life. In turn, the latter implies that training externalities are lower for the older workers. We calibrate the model on the french economy and assess the quantitative impact of externalities on employment.

Date: 2018
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