Formal Education Versus Learning-by-Doing

Frédéric Gavrel, Isabelle Lebon and Therese Rebiere

No 8341, IZA Discussion Papers from Institute of Labor Economics (IZA)

Abstract: The efficiency of educational choices is studied in a search-matching model where individuals face a tradeoff: acquiring formal education or learning while on the job. When their education effort is successful, newcomers directly obtain a high-skill job; otherwise, they begin with a low-skill job, learn-by-doing and then search while on-the-job for a high-skill job. Low-skill firms suffer from hold-up behavior by high-skill firms. The low-skill sector is insufficiently attractive and individuals devote too much effort to formal education. A self-financing tax and subsidy policy restores market efficiency.

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)
Pages: 39 pages
Date: 2014-07
New Economics Papers: this item is included in nep-dge, nep-edu, nep-lab and nep-lma
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Related works:
Working Paper: Formal Education Versus Learning-by-doing (2009)
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