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Costs and benefits of an Individual Learning Account (ILA): A simulation analysis for the Netherlands

Author

Listed:
  • Henri Bussink

    (SEO Amsterdam Economics)

  • Bas ter Weel

    (University of Amsterdam)

Abstract
This study analyses costs and benefits of a public-private funded individual learning account (ILA) for the labour force in the Netherlands. We consider an ILA that is funded by subsidies targeted at low- and medium-educated workers and co-funded by training levies as a share of the wage bill. We simulate two alternative steady-state scenarios about the uptake of resources and increase in training activity, using a lifecycle model of human capital investments. We derive predictions for gross earnings, income inequality and costs (training subsidies and tax deductions) and benefits (tax revenues and fewer unemployment benefits). Our results show how the balance of costs and benefits depends on the interplay between take-up rates, returns to training and the deadweight loss of subsidizing an ILA for the whole labour force. Our model and results contribute to policy trade-offs about the introduction of ILA’s to stimulate the resilience of the labour fo

Suggested Citation

  • Henri Bussink & Bas ter Weel, 2022. "Costs and benefits of an Individual Learning Account (ILA): A simulation analysis for the Netherlands," Tinbergen Institute Discussion Papers 22-077/V, Tinbergen Institute.
    • Handle: RePEc:tin:wpaper:20220077
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    References listed on IDEAS

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    More about this item

    Keywords

    Human capital investments; Individual learning accounts; Lifelong learning;
    All these keywords.

    JEL classification:

    • J24 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Human Capital; Skills; Occupational Choice; Labor Productivity
    • J33 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Compensation Packages; Payment Methods

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