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Retraining the Unemployed in a Model of Equilibrium Employment
Author(s) -
Masters Adrian
Publication year - 2000
Publication title -
bulletin of economic research
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.227
H-Index - 29
eISSN - 1467-8586
pISSN - 0307-3378
DOI - 10.1111/1467-8586.00111
Subject(s) - ceteris paribus , retraining , unemployment , economics , subsidy , matching (statistics) , labour economics , incentive , general equilibrium theory , microeconomics , macroeconomics , market economy , statistics , mathematics , international trade
An equilibrium model of search and matching is developed to analyse the effects of retraining the unemployed on the market for skilled (or semi‐skilled) workers. Versions of the model with free entry of vacancies and fixed numbers of jobs are considered. The latter environment exhibits multiple equilibria. While subsidized training (and enforced participation) is justified on employment grounds, it cannot be justified on efficiency grounds. Policies that, ceteris paribus , lower unemployment, also reduce the incentive to train. When such policies are introduced to a training economy, training may cease and unemployment can rise.