Depreciation of human capital and vocational training over the life-cycle: The dynamics of social externalities

In this research work, we provide a theoretical framework with which to analyze interactions between investments in human capital, economic turbulence and life cycle in order to examine social externalities related to general training. The existence of such externalities lead to exclude some workers from the vocational training system, contrary to what the social optimum suggests. It should be proposed a training support policy directed on certain workers. Our main contribution consists in replacing the question of social externalities of general training in a life-cycle framework, and emphasizing the need to set up an age-dependent policy of subsidies to encourage workplace training and restore social optimality. We highlight that employers stop training workers too early in the life-cycle compared to what the inclusion of social externalities suggests. By contrast, at the end of career (closer to retirement), the social return of training converges towards the private one and is close to zero. Our results argue in favour of an incentive policy non-monotone with age, increasing up to a certain age and decreasing beyond.