This paper offers and tests a theory of training whereby workers do not pay for general training they receive. The crucial ingredient in our model is that the current employer has superior information about the worker’s ability relative to other firms. This informational advantage gives the employer an ex-post monopsony power over the worker which encourages the firm to provide training. We show that the model can lead to multiple equilibria. In one equilibrium quits are endogenously high and as a result employers have limited monopsony power and are willing to supply only little training, while in another equilibrium quits are low and training high. We also derive predictions from our model not shared by other explanations of firm-sponsored training. Using microdata from Germany, we show that the predictions of the specific human capital model are rejected, while our model receives support from the data.
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Paper provided by C.E.P.R. Discussion Papers in its series CEPR Discussion Papers with number
1460.
Find related papers by JEL classification: D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information J24 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Human Capital; Skills; Occupational Choice; Labor Productivity
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.:
Gibbons, Robert & Katz, Lawrence F, 1991.
"Layoffs and Lemons,"
Journal of Labor Economics,
University of Chicago Press, vol. 9(4), pages 351-80, October.
[Downloadable!] (restricted)
Other versions:
Robert Gibbons & Lawrence Katz, 1989.
"Layoffs and Lemons,"
Working Papers
629, Princeton University, Department of Economics, Industrial Relations Section..
[Downloadable!]
Gibbons, R. & Katz, L.F., 1989.
"Layoffs And Lemons,"
Working papers
531, Massachusetts Institute of Technology (MIT), Department of Economics.
Robert Gibbons & Lawrence Katz, 1991.
"Layoffs and Lemons,"
NBER Working Papers
2968, National Bureau of Economic Research, Inc.
[Downloadable!] (restricted)
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.) This item has more than 25 citations. To prevent cluttering this page, these citations are listed on a separate page.