Depreciation of human capital and continuing education over the life cycle: What are the dynamics of social externalities?

Summary In this study, we present a theoretical framework for analyzing the interactions between human capital investment, economic turbulence, and the life cycle and examine the dynamics of social externalities related to general education. The existence of such externalities leads to the exclusion of some workers from the vocational training system, which is wrong from the point of view of what would be socially desirable. It is therefore necessary to propose a policy of support for training targeted at certain types of workers. The main contribution of this paper is to position this problem of the social externalities of continuing education in the perspective of the worker's life cycle, and to emphasize the need for an age-dependent training incentive policy. We show that employers tend to increase their criteria for access to continuing education too early in the life cycle of workers, relative to what would be suggested by the consideration of social externalities. On the other hand, at the very end of the career (approaching retirement) the social return converges towards the private return to training and tends towards zero. On balance, this argues for an incentive policy that is not monotonous with age, increasing up to a certain age and then decreasing thereafter.