Adverse Selection, Short-Term Contracting, and the Underprovision of On-the-Job Training
AbstractThis article argues that the existence of adverse selection (worker heterogeneity) can explain the underprovision of general training by employers. High-ability workers value the option to entertain outside wage offers once their abilty becomes known to the market. Offering short-term contracts is, therefore, a way to screen high-ability types from low-ability types. A firm is not willing to train workers under short-term contracts. Hence, despite the positive returns to training, training may be underprovided in equilibrium. More generally, this article contributes to the literature that seeks to explain the puzzling phenomenon of short-term contracts governing long-term buyer-seller relationships.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
Bibliographic InfoPaper provided by Department of Economics, Institute for Business and Economic Research, UC Berkeley in its series Department of Economics, Working Paper Series with number qt3636n9n2.
Date of creation: 01 Feb 1990
Date of revision:
Contact details of provider:
Postal: F502 Haas, Berkeley CA 94720-1922
Phone: (510) 642-1922
Fax: (510) 642-5018
Web page: http://www.escholarship.org/repec/iber_econ/
More information through EDIRC
general training; adverse selection; contract length; Social and Behavioral Sciences;
Other versions of this item:
- Hermalin Benjamin E., 2002. "Adverse Selection, Short-Term Contracting, and the Underprovision of On-the-Job Training," The B.E. Journal of Economic Analysis & Policy, De Gruyter, vol. 1(1), pages 1-21, July.
- Benjamin Hermalin., 1990. "Adverse Selection, Short-Term Contracting, and the Underprovision of On-the-Job Training," Economics Working Papers 90-139, University of California at Berkeley.
- J24 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Human Capital; Skills; Occupational Choice; Labor Productivity
- D23 - Microeconomics - - Production and Organizations - - - Organizational Behavior; Transaction Costs; Property Rights
- D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design
You can help add them by filling out this form.
CitEc Project, subscribe to its RSS feed for this item.
- James Malcomson & James W. Maw, 2002.
"General Training by Firms, Apprentice Contracts, and Public Policy,"
Economics Series Working Papers
86, University of Oxford, Department of Economics.
- Malcomson, James M. & Maw, James W. & McCormick, Barry, 2003. "General training by firms, apprentice contracts, and public policy," European Economic Review, Elsevier, vol. 47(2), pages 197-227, April.
- James M. Malcomson & James W. Maw & Barry McCormick, 2002. "General Training by Firms, Apprentice Contracts, and Public Policy," CESifo Working Paper Series 696, CESifo Group Munich.
- Malcomson, James M. & Maw, James W. & McCormick, Barry, 2000. "General training by firms, apprentice contracts, and public policy," Discussion Paper Series In Economics And Econometrics 0021, Economics Division, School of Social Sciences, University of Southampton.
- Jean Tirole, 2009.
"Cognition and Incomplete Contracts,"
American Economic Review,
American Economic Association, vol. 99(1), pages 265-94, March.
- Tirole, Jean, 2009. "Cognition and Incomplete Contracts," Open Access publications from University of Toulouse 1 Capitole http://neeo.univ-tlse1.fr, University of Toulouse 1 Capitole.
- Tirole, Jean, 2008. "Cognition and Incomplete Contracts," IDEI Working Papers 453, Institut d'Économie Industrielle (IDEI), Toulouse.
- Antonio Nicolò & Piero Tedeschi, 2006.
"Missing Contracts: On the Rationality of not Signing a Prenuptial Agreement,"
20060506, Università degli Studi di Milano-Bicocca, Dipartimento di Statistica.
- Antonio Nicolo' & Piero Tedeschi, 2004. "Missing Contracts: On the Rationality of not Signing a Prenuptial Agreement," Game Theory and Information 0406001, EconWPA.
- Stefano Comino & Antonio Nicolò & Piero Tedeschi, 2006.
"Termination Clauses in Partnerships,"
20060505, Università degli Studi di Milano-Bicocca, Dipartimento di Statistica.
- Fredrik Andersson, 2002. "Technological Change,Labour Contracts and Income Distribution," Finnish Economic Papers, Finnish Economic Association, vol. 15(1), pages 24-35, Spring.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Lisa Schiff).
If references are entirely missing, you can add them using this form.