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Worker Reciprocity and Employer Investment in Training

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Author Info
Edwin Leuven
Hessel Oosterbeek
Randolph Sloof
Chris van Klaveren

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Abstract

Standard economic theory predicts that firms will not invest in general training and will underinvest in specific training. Empirical evidence, however, indicates that firms do invest in general training of their workers. Evidence from laboratory experiments points to less underinvestment in specific training than theory predicts. We propose a simple model in which a firm invests the socially optimal amounts in general and specific training if the worker is sufficiently motivated by reciprocity. A reciprocal worker may be willing to give the firm a full return on its investment. We present empirical evidence that supports the proposed mechanism. Workers with a high sensitivity to reciprocity have 15% higher training rates than workers with a low sensitivity to reciprocity. Copyright (c) The London School of Economics and Political Science 2005.

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Article provided by London School of Economics and Political Science in its journal Economica.

Volume (Year): 72 (2005)
Issue (Month): 285 (02)
Pages: 137-149
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Handle: RePEc:bla:econom:v:72:y:2005:i:285:p:137-149

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References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
  1. Ernst Fehr & Simon Gaechter, . "Fairness and Retaliation: The Economics of Reciprocitys," IEW - Working Papers iewwp040, Institute for Empirical Research in Economics - IEW. [Downloadable!]
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  2. Hessel Oosterbeek & Randolph Sloof & Joep Sonnemans, 2007. "Promotion Rules and Skill Acquisition: An Experimental Study," Economica, London School of Economics and Political Science, vol. 74(294), pages 259-297, 05. [Downloadable!] (restricted)
  3. Aghion, Philippe & Dewatripont, Mathias & Rey, Patrick, 1994. "Renegotiation Design with Unverifiable Information," Econometrica, Econometric Society, vol. 62(2), pages 257-82, March. [Downloadable!] (restricted)
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  4. Kahn, Charles & Huberman, Gur, 1988. "Two-sided Uncertainty and "Up-or-Out" Contracts," Journal of Labor Economics, University of Chicago Press, vol. 6(4), pages 423-44, October. [Downloadable!] (restricted)
  5. Jörn-Steffen Pischke, 2001. "Continuous training in Germany," Journal of Population Economics, Springer, vol. 14(3), pages 523-548. [Downloadable!] (restricted)
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  6. Edwin Leuven & Hessel Oosterbeek, 2004. "Evaluating the Effect of Tax Deductions on Training," Journal of Labor Economics, University of Chicago Press, vol. 22(2), pages 461-488, April. [Downloadable!]
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  7. Steven Shavell, 1980. "Damage Measures for Breach of Contract," Bell Journal of Economics, The RAND Corporation, vol. 11(2), pages 466-490, Autumn. [Downloadable!] (restricted)
  8. Chung, T.Y., 1991. "On the Social Optimality of Liquidated Damage Clauses: An Economic Analysis," UWO Department of Economics Working Papers 9102, University of Western Ontario, Department of Economics.
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  9. Daron Acemoglu & Jorn-Steffen Pischke, 1999. "The Structure of Wages and Investment in General Training," Journal of Political Economy, University of Chicago Press, vol. 107(3), pages 539-572, June. [Downloadable!] (restricted)
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  10. Stevens, Margaret, 1994. "A Theoretical Model of On-the-Job Training with Imperfect Competition," Oxford Economic Papers, Oxford University Press, vol. 46(4), pages 537-62, October. [Downloadable!] (restricted)
  11. Edwin Leuven & Hessel Oosterbeek, 1997. "Demand and Supply of Work-Related Training: Evidence from our Four Countries," Tinbergen Institute Discussion Papers 97-013/3, Tinbergen Institute.
  12. Gary S. Becker, 1962. "Investment in Human Capital: A Theoretical Analysis," Journal of Political Economy, University of Chicago Press, vol. 70, pages 9. [Downloadable!] (restricted)
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Cited by:
(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. Rita Asplund, 2004. "The Provision and Effects of Company Training. A brief review of the literature," Discussion Papers 907, The Research Institute of the Finnish Economy. [Downloadable!]
  2. Nadège Marchand & Claude Montmarquette, 2008. "Training Without Certification: An Experimental Study," CIRANO Working Papers 2008s-01, CIRANO. [Downloadable!]
  3. Gerald Pruckner & Rupert Sausgruber, 2006. "Trust on the Streets: A Natural Field Experiment on Newspaper Purchasing," Discussion Papers 06-01, University of Copenhagen. Department of Economics. [Downloadable!]
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