Formal Education Versus Learning-by-Doing

39 Pages Posted: 2 Aug 2014

See all articles by Frédéric Gavrel

Frédéric Gavrel

Université de Caen

Isabelle Lebon

Université de Caen

Therese Rebiere

Conservatoire National des Arts et Métiers; IZA Institute of Labor Economics

Abstract

The efficiency of educational choices is studied in a search-matching model where individuals face a tradeoff: acquiring formal education or learning while on the job. When their education effort is successful, newcomers directly obtain a high-skill job; otherwise, they begin with a low-skill job, learn-by-doing and then search while on-the-job for a high-skill job. Low-skill firms suffer from hold-up behavior by high-skill firms. The low-skill sector is insufficiently attractive and individuals devote too much effort to formal education. A self-financing tax and subsidy policy restores market efficiency.

Keywords: formal education, learning-by-doing, market efficiency, on-the-job search, search unemployment

JEL Classification: H21, I20, J21, J64, J68

Suggested Citation

Gavrel, Frédéric and Lebon, Isabelle and Rebiere, Therese, Formal Education Versus Learning-by-Doing. Available at SSRN: https://ssrn.com/abstract=2475309 or http://dx.doi.org/10.2139/ssrn.2475309

Frédéric Gavrel (Contact Author)

Université de Caen ( email )

F-14032 Caen Cedex, Normandy
France

Isabelle Lebon

Université de Caen ( email )

F-14032 Caen Cedex
France

Therese Rebiere

Conservatoire National des Arts et Métiers ( email )

292 rue Saint Martin
Paris, 75003
France

IZA Institute of Labor Economics ( email )

P.O. Box 7240
Bonn, D-53072
Germany

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