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Specific Training Sometimes Cuts Wages and Always Cuts Turnover

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  • Lalith Munasinghe

    (Barnard College, Columbia University)

  • Brendan O'Flaherty

    (Columbia University)

Abstract

Turnover falls with tenure, but wages do not always rise (and sometimes fall) with tenure. We reconcile these findings by revisiting an old issue: how gains from firm-specific training are split between workers and firms. The division is determined by a stationary distribution of outside offers. The lower the wage a firm pays to a specifically trained worker, the more profit it makes but the more likely the employee is to leave. The optimal time paths of wages and turnover show that, if marginal product is increasing, wages need not be increasing but it always implies a falling turnover rate.

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Bibliographic Info

Article provided by University of Chicago Press in its journal Journal of Labor Economics.

Volume (Year): 23 (2005)
Issue (Month): 2 (April)
Pages: 213-234

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Handle: RePEc:ucp:jlabec:v:23:y:2005:i:2:p:213-234

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Cited by:
  1. Sullivan, Paul, 2010. "Empirical evidence on occupation and industry specific human capital," Labour Economics, Elsevier, vol. 17(3), pages 567-580, June.
  2. Arceo-Gómez, Eva Olimpia & Campos-Vázquez, Raymundo M., 2012. "¿Quiénes son los NiNis en México?
    [Who are the idle youth in Mexico?]
    ," MPRA Paper 44530, University Library of Munich, Germany, revised Jan 2013.
  3. Fabling, Richard & Grimes, Arthur, 2007. "HR Practices and Firm Performance: What Matters and Who Does It?," Occasional Papers 07/2, Ministry of Economic Development, New Zealand.
  4. Lalith Munasinghe, 2005. "A Theory of Wage and Turnover Dynamics," 2005 Meeting Papers 924, Society for Economic Dynamics.
  5. Christos Bilanakos & Colin P. Green & John S. Heywood & Nikolaos Theodoropoulos, 2014. "Do Dominant Firms Provide More Training?," University of Cyprus Working Papers in Economics 06-2014, University of Cyprus Department of Economics.
  6. Carter Thomas J., 2011. "Training and Turnover with Equilibrium Unemployment," The B.E. Journal of Economic Analysis & Policy, De Gruyter, vol. 11(1), pages 1-23, March.

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