Does Public Assistance for Skills Formation Necessarily Improve Wage Inequality in the Future?

As per the conventional wisdom there should be provision for public assistance for skills acquirement for improving relative wage inequality in the future. This paper attempts to explore the validity of this traditional perception with the help of a two-sector, specific factor general equilibrium model with endogenous skills formation and provision for public subsidy aimed to encourage acquisition of skills on the part of unskilled labour. The analysis questions the desirability of the policy on the ground that it may not only aggravate inequality in the current period but also does not necessarily improve the wage disparity at a future date.