Training, Job Security And Incentive Wages
AbstractThis paper considers the optimal level of firm-specific training by taking into account the positive effect of training on the expected duration of workersâ current employment. In the framework of an efficiency wage model, a short expected job tenure represents a disamenity that reduces the penalty from shirking. As this disamenity increases, workers have an incentive to continue providing a positive level of effort only if they are compensated by a higher wage. We endogenize the employment separation rate by introducing firm-specific training. Firm-specific training creates a rent that is lost if the worker is separated from the firm. As a result, the firm will be more reluctant to fire its trained workforce in a recession. This implies that firm-specific training can decrease current wages as it implies a credible commitment to lower future labour turnover.
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Bibliographic InfoArticle provided by Scottish Economic Society in its journal Scottish Journal of Political Economy.
Volume (Year): 55 (2008)
Issue (Month): 1 (02)
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Web page: http://www.blackwellpublishing.com/journal.asp?ref=0036-9292
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