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Does Public Assistance for Skills Formation Necessarily Improve Wage Inequality in the Future?

Sarbajit Chaudhuri ()

MPRA Paper from University Library of Munich, Germany

Abstract: As per the conventional wisdom there should be provision for public assistance for skills acquirement for improving relative wage inequality in the future. This paper attempts to explore the validity of this traditional perception with the help of a two-sector, specific factor general equilibrium model with endogenous skills formation and provision for public subsidy aimed to encourage acquisition of skills on the part of unskilled labour. The analysis questions the desirability of the policy on the ground that it may not only aggravate inequality in the current period but also does not necessarily improve the wage disparity at a future date.

Keywords: Skills Formation; Wage Inequality; Skilled Labour; Unskilled Labour; Education Subsidy; Intertemporal Analysis; General Equilibrium. (search for similar items in EconPapers)
JEL-codes: D58 I24 I28 J31 (search for similar items in EconPapers)
Date: 2014-08-06
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