Retraining and long-term unemployment in a model of unlearning by not doing

Melvyn Coles, Adrian Masters

Research output: Contribution to journalArticlepeer-review

Abstract

This paper develops a dynamically consistent model of search, matching and bargaining when worker skills decline while unemployed. Long-term unemployment emerges as an endogenous phenomenon. Even with constant returns to matching, multiple Pareto rankable equilibria are possible. Policies to address long-term unemployment are best directed toward prevention (e.g. vacancy creation subsidies) rather than cure (e.g. retraining subsidies). (C) 2000 Elsevier Science B.V. All rights reserved.

Original languageEnglish (US)
Pages (from-to)1801-1822
Number of pages22
JournalEuropean Economic Review
Volume44
Issue number9
DOIs
StatePublished - 2000

Keywords

  • Long-term unemployment
  • Skill decay
  • Training

ASJC Scopus subject areas

  • Finance
  • Economics and Econometrics

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