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Working to learn

Author

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  • Fudenberg, Drew
  • Georgiadis, George
  • Rayo, Luis

Abstract

We study the joint determination of wages, effort, and training in “apprenticeships” where novices must work in order to learn. We introduce the idea of learning-by-doing as an inequality constraint, which allows masters to strategically slow training down. Every Pareto-efficient contract has an initial phase where the novice learns as fast as technologically feasible, followed by a phase where their master constrains how fast they learn. This latter phase mitigates the novice's commitment problem, and thus lets the novice consume more than they produce early on in the relationship. Our model has novel implications for optimal regulation.

Suggested Citation

  • Fudenberg, Drew & Georgiadis, George & Rayo, Luis, 2021. "Working to learn," Journal of Economic Theory, Elsevier, vol. 197(C).
    • Handle: RePEc:eee:jetheo:v:197:y:2021:i:c:s0022053121001642
    DOI: 10.1016/j.jet.2021.105347
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    References listed on IDEAS

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    1. Drew Fudenberg & Luis Rayo, 2019. "Training and Effort Dynamics in Apprenticeship," American Economic Review, American Economic Association, vol. 109(11), pages 3780-3812, November.
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    More about this item

    Keywords

    Apprenticeships; Learning by doing; Incentives; Contract Theory; Principal-agent;
    All these keywords.

    JEL classification:

    • C6 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling
    • D8 - Microeconomics - - Information, Knowledge, and Uncertainty
    • J3 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs
    • L2 - Industrial Organization - - Firm Objectives, Organization, and Behavior
    • M5 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Personnel Economics

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