Scandinavian Working Papers in Economics

Working Papers,
Copenhagen Business School, Department of Economics

No 09-2001: Stick, Carrot and Skill Acquisition

Trine Filges and Birthe Larsen
Additional contact information
Trine Filges: Danish National Institute of Social Research, Postal: Centre for Research in Social Integration and Marginalization, The Danish National Institute of Social Research, Herluf Trolles Gade 11, DK-1052 Copenhagen K
Birthe Larsen: Department of Economics, Copenhagen Business School, Postal: Department of Economics, Copenhagen Business School, Solbjerg Plads 3 C, 5. sal, DK-2000 Frederiksberg, Denmark

Abstract: This paper examins the macroeconomic effects of youth unemployement programmes in the form of vocational training (YUPs), developing a two sector general equilibrium model featuring matching frictions and worker-firm wage bargaining for skilled workers. Unskilled sector wages are indexed to skilled sector wages. Workers differ with respect to ability, having importance for the young worker`s skill decision. Furthermore, a young worker may be offered vocational training through YUPs. The total number of skilled workers is therefore determined by these two channels and the interaction between them. We focus on the impact of YUPs on skill division, unemployment distribution workers and aggregate unemployment.

Keywords: Skill acquisition; Search; Unemployment

JEL-codes: J18; J38; J68

17 pages, December 11, 2001

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