Stick, Carrot and Skill Acquisition

Birthe Larsen, Trine Filges

Research output: Contribution to journalJournal articleResearchpeer-review


We evaluate the impact of specially designed youth unemployment programmes (YUPs), intended to provide young unemployed unskilled workers with skills. If unemployment among skilled workers is lower than among unskilled workers, YUPs imply that unemployment falls. However, YUPs potentially crowd out ordinary training. We set up an equilibrium matching model with endogenous skill choice and examine the impact of an increase in programme participation. We derive a condition for crowding out of ordinary training, as well as a condition for an increase in the skilled labour force and thereby reduced unemployment. The impact of YUPs on welfare and wage dispersion is also considered.
Original languageEnglish
JournalScandinavian Journal of Economics
Issue number3
Pages (from-to)495-519
Number of pages24
Publication statusPublished - 2005

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