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The labour market: Unemployment and workforce training

The labour market: Unemployment and workforce training. Outline 1. How does the labour market work? 2. Unemployment: Who bears the burden? 3. Are ALMPs (e.g. YTS, New Deal) successful?. 1. A two-sided search model. Agents have imperfect information Search is costly Search decisions

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The labour market: Unemployment and workforce training

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  1. The labour market: Unemployment and workforce training Outline 1. How does the labour market work? 2. Unemployment: Who bears the burden? 3. Are ALMPs (e.g. YTS, New Deal) successful?

  2. 1. A two-sided search model • Agents have imperfect information • Search is costly • Search decisions • (I) Choice of search technology • (ii) Choice of search intensity • (iii) Stopping rule

  3. Stopping rules • Worker: wage offer > reservation wage • Firm: expected surplus (productivity) > reservation surplus • Meeting & matching • (I) Firms: arrival rate of applicants • (ii) Workers: arrival rate of firms • (I) + (ii) = contact rate (c) (meeting) • Outcome: match or not (probability m)

  4. The hiring rate (h) • h = mc • h = mc(U, V) • Derive the Beveridge curve • Causes of unemployment? • 1. Macro factors - shift the beveridge curve • 2. Micro factors - affecting Pr(o) & Pr(a)

  5. 2. Who bears the burden of unemployment? • (a) Youths • (b) The unqualified • (c) Ethnic minorities • persistence • causes - an official view

  6. Official view • “Factors which may explain the persistently higher rates of unemployment among ethnic minorities, apart from a) the younger age profile… include [their] b) generally low level of qualifications and c) their industrial and d) regional distribution.” • Alternative views • discrimination • enclaves - a taste for isolation

  7. 3. Have ALMPs been successful? • What are ALMPs? • I) Job Centers/Employment Offices • (ii) Services for the disabled • (iii) Training programmes • How do we evaluate their impact? On what?

  8. Evaluation • On what? • A) Subsequent wages - before & after • B) Employment probability • How? • Counterfactual question • partial analysis v. cost-benefit analysis • Successful? • Youth training - no wage effect, small effect on pr(employment)

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