Anders Humlum, University of Chicago. "Retraining Subsidies"
Department seminar. Anders Humlum is a Postdoctoral Research Fellow at the Becker Friedman Institute, University of Chicago. He will present the paper: "Retraining Subsidies".
I study the equilibrium impacts of retraining subsidies using a reform that temporarily eliminated all subsidies for 40 percent of the courses available for unemployed workers in Denmark. Studying this policy experiment, I find that retraining subsidies boost aggregate course activity and help workers transition in the labor market. Retraining courses lower the barriers to switching occupations by around 60 percent. I develop a dynamic model of training and labor markets in which firms train hires to ease transitions. Estimating the structural model to match the responses to the temporary reform, I simulate the dynamic equilibrium effects of permanent changes to the subsidy structure. In the long run, when firms and workers have adjusted, total training activity increases 80 cents for every dollar of subsidies. On top of alleviating costly worker transitions, retraining subsidies can deliver efficiency gains by reducing the fiscal externality of unemployment benefits.