Labour Market Policy and the Equity-Efficiency Trade-Off

Trine Filges (), John Kennes, Birthe Larsen and Torben Tranaes ()
Additional contact information
Trine Filges: Danish National Centre for Social Research (SFI)

No 2824, IZA Discussion Papers from Institute of Labor Economics (IZA)

Abstract: This paper studies labour market policy in a society where differently gifted individuals can invest in training to further increase their labour market productivity. Furthermore, the government seeks both efficiency and equity. Frictions in the matching process create unemployment and differently skilled workers face different unemployment risks. We show that in such an environment, training programmes targeted to the disadvantaged workers complement passive transfers (UI benefits), unlike a general training subsidy. Combining passive subsidies with a training subsidy conditioned on individual unemployment duration – the typical Active Labour Market Programme – implies a favorable trade-off between equity and efficiency which encourages relative high spending on training.

Keywords: active and passive policy; equity-efficiency trade-off; labour market (search for similar items in EconPapers)
JEL-codes: J24 J31 J6 (search for similar items in EconPapers)
Pages: 29 pages
Date: 2007-06
References: View references in EconPapers View complete reference list from CitEc
Citations:

Published - publiched in: Journal of Macroeconomics, 2011, 33 (4), 738-753

Downloads: (external link)
https://docs.iza.org/dp2824.pdf (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:iza:izadps:dp2824

Ordering information: This working paper can be ordered from
IZA, Margard Ody, P.O. Box 7240, D-53072 Bonn, Germany

Access Statistics for this paper

More papers in IZA Discussion Papers from Institute of Labor Economics (IZA) IZA, P.O. Box 7240, D-53072 Bonn, Germany. Contact information at EDIRC.
Bibliographic data for series maintained by Holger Hinte ().