Does Public Assistance for Skills Formation Necessarily Improve Wage Inequality in the Future?

Chaudhuri, Sarbajit (2014): Does Public Assistance for Skills Formation Necessarily Improve Wage Inequality in the Future?

Abstract

As per the conventional wisdom there should be provision for public assistance for skills acquirement for improving relative wage inequality in the future. This paper attempts to explore the validity of this traditional perception with the help of a two-sector, specific factor general equilibrium model with endogenous skills formation and provision for public subsidy aimed to encourage acquisition of skills on the part of unskilled labour. The analysis questions the desirability of the policy on the ground that it may not only aggravate inequality in the current period but also does not necessarily improve the wage disparity at a future date.

• Item Type: MPRA Paper
• Language: English
• Keywords: Skills Formation, Wage Inequality, Skilled Labour, Unskilled Labour, Education Subsidy, Intertemporal Analysis, General Equilibrium.
• Subjects: D - Microeconomics > D5 - General Equilibrium and Disequilibrium > D58 - Computable and Other Applied General Equilibrium Models; I - Health, Education, and Welfare > I2 - Education and Research Institutions > I24 - Education and Inequality; I - Health, Education, and Welfare > I2 - Education and Research Institutions > I28 - Government Policy; J - Labor and Demographic Economics > J3 - Wages, Compensation, and Labor Costs > J31 - Wage Level and Structure ; Wage Differentials

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