Policies to reduce factor immobility

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8 Terms

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Policies for occupational immobility

  1. Subsidise retraining or upskilling (SkillsFuture credits)

  2. Public education to encourage skills upgrading

  3. R&D to make factors of production more mobile


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How does subsidies, public education & R&D reduce market failure? (occupational)

How: Address mismatch of skills and allow workers to transit into new jobs, reducing the shortage of labour in expanding industries.

Results in: Reduction in unNt → improvement in prod efficiency → produce on PPC → allocative efficiency achieved → MF resolved.

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Example of a policy used to resolve occupational immobility

SkillFuture Credits in Singapore

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Limitations of policies solving occupational immobility

  • Not feasible: Require large sums of $ to be allocated to retraining and upskilling

  • Address root cause: Mismatch of skills

  • Time lag: Long time to take into effect

  • Dependent on receptiveness of workers (less effective with older workers who might find it harder to pick up current skills)


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Policies for geographical immobility

  1. Subsidised rental housing

  2. Cooling measures (higher I/r for residential purchase): Lower demand in cities → reduce rental and housing prices

  3. Govt R&D: Creation of jobs and job portals for job matching

  4. Relax immigration controls & issue more work permits


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How does subsidies, cooling measure, R&D, & relaxation of immigration reduce market failure? (geographical)

How:

Cooling measures + subsidies: More affordable housing prices, workers are more inclined to accept job offers in cities.

Job portals: Enable easy job matching for spouses to relocate into the new city.

Relax immigration controls: Allow spouses to relocate into the city with workers

Results in: Reduction in unNt → improvement in prod efficiency → produce on PPC → allocative efficiency achieved → MF resolved.

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Limitations of policies solving geographical immobility

  • Not feasible: Require large sums of $ to be allocated to improve infrastructure

  • Dependent on workers’ willingness to take up job opportunities that are further away

  • Time lag: Long time for the policy to take into effect


8
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Example of policies resolving geographical immobility

China; One-Belt-One-Road project