This paper studies labour market policy in a society where differently gifted individuals can invest in training to further increase their labour market productivity. Furthermore, the government seeks both efficiency and equity. Frictions in the matching process create unemployment and...

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...