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Career Paths, Unemployment, and the Efficiency of the Labor Market: Should Youth Employment Be Subsidized?
Author(s) -
GAVREL FRÉDÉRIC,
LEBON ISABELLE,
REBIÈRE THERESE
Publication year - 2010
Publication title -
journal of public economic theory
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.809
H-Index - 32
eISSN - 1467-9779
pISSN - 1097-3923
DOI - 10.1111/j.1467-9779.2010.01463.x
Subject(s) - subsidy , unemployment , labour economics , youth unemployment , economic shortage , economics , government (linguistics) , economic growth , market economy , linguistics , philosophy
This paper studies the implications of learning‐by‐doing on youth unemployment and market efficiency when workers benefiting from this kind of training experience search (while on the job) for a higher skill job. Firms with low‐skill jobs suffer from a poaching behavior by firms with high‐skill jobs, causing a shortage of low‐skill jobs and excessive youth unemployment. An optimal policy, consisting of taxing the output of high‐skill jobs and subsidizing the output of low‐skill jobs, restores market efficiency and reduces youth unemployment.