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Training, Rent-Sharing and Unions

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Author Info
Booth, Alison L
Francesconi, Marco
Zoega, Gylfi

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Abstract

We investigate two dimensions of investment in general human capital on-the-job: the number of workers trained and the intensity of training for each worker. In the benchmark case, we consider wage and training decisions made by firms in an imperfectly competitive labour market. The benchmark case generates two types of market failure: too few workers are trained, and the workers who are hired receive too little training. This is caused by the firms' discount rate exceeding the social discount rate, due to a 'quitting externality'. We show that the presence of labour unions can increase social welfare by increasing training intensity, while reducing welfare by lowering the number of workers trained. Using the British Household Panel Survey, we confirm the predictions of the model.

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Publisher Info
Paper provided by C.E.P.R. Discussion Papers in its series CEPR Discussion Papers with number 2200.

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Date of creation: Aug 1999
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Handle: RePEc:cpr:ceprdp:2200

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Related research
Keywords: General Training; Human Capital; Labour Unions; Quitting Externalities;

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Find related papers by JEL classification:
J24 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Human Capital; Skills; Occupational Choice; Labor Productivity
J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials
J41 - Labor and Demographic Economics - - Particular Labor Markets - - - Labor Contracts

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.:

  1. Klemperer, Paul, 1995. "Competition When Consumers Have Switching Costs: An Overview with Applications to Industrial Organization, Macroeconomics, and International Trade," Review of Economic Studies, Blackwell Publishing, vol. 62(4), pages 515-39, October. [Downloadable!] (restricted)
  2. Booth, Alison L & Chatterji, Monojit, 1998. "Unions and Efficient Training," Economic Journal, Royal Economic Society, vol. 108(447), pages 328-43, March. [Downloadable!] (restricted)
  3. Chang, Chun & Wang, Yijiang, 1996. "Human Capital Investment under Asymmetric Information: The Pigovian Conjecture Revisited," Journal of Labor Economics, University of Chicago Press, vol. 14(3), pages 505-19, July. [Downloadable!] (restricted)
  4. Lynch, Lisa M, 1992. "Private-Sector Training and the Earnings of Young Workers," American Economic Review, American Economic Association, vol. 82(1), pages 299-312, March.
  5. Miller, M. & Ippolito, R. & Zhang, L., 1997. "Shareholders and Stakeholder: Human Capital and Industry Equilibrium," The Warwick Economics Research Paper Series (TWERPS) 481, University of Warwick, Department of Economics.
    Other versions:
  6. Stevens, Margaret, 1994. "A Theoretical Model of On-the-Job Training with Imperfect Competition," Oxford Economic Papers, Oxford University Press, vol. 46(4), pages 537-62, October. [Downloadable!] (restricted)
  7. Booth, Alison L, 1991. "Job-Related Formal Training: Who Receives It and What Is It Worth?," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 53(3), pages 281-94, August.
  8. Lee, Lung-fei & Maddala, G S & Trost, R P, 1980. "Asymptotic Covariance Matrices of Two-Stage Probit and Two-Stage Tobit Methods for Simultaneous Equations Models with Selectivity," Econometrica, Econometric Society, vol. 48(2), pages 491-503, March. [Downloadable!] (restricted)
  9. Booth, Alison L & Zoega, Gylfi, 1999. "Do Quits Cause Under-Training?," Oxford Economic Papers, Oxford University Press, vol. 51(2), pages 374-86, April.
  10. Wiji Arulampalam & Alison Booth, 1997. "Labour Market Flexibility and Skills Acquisition: Is there a trade-off?," ILR working papers 013, Institute for Labour Research. [Downloadable!]
  11. David De Meza & Ben Lockwood, 1998. "Does Asset Ownership Always Motivate Managers? Outside Options And The Property Rights Theory Of The Firm," The Quarterly Journal of Economics, MIT Press, vol. 113(2), pages 361-386, May. [Downloadable!] (restricted)
  12. Acemoglu, D. & Pischke, J.S., 1997. "The Structure of Wages and Investment in General Training," Working papers 97-24, Massachusetts Institute of Technology (MIT), Department of Economics.
    Other versions:
  13. Daron Acemoglu & Jörn-Steffen Pischke, 1998. "Why Do Firms Train? Theory And Evidence," The Quarterly Journal of Economics, MIT Press, vol. 113(1), pages 78-118, February. [Downloadable!] (restricted)
    Other versions:
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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.)

  1. Lorraine Dearden & Howard Reed & John Van Reenen, 2005. "The Impact of Training on Productivity and Wages: Evidence from British Panel Data," CEP Discussion Papers dp0674, Centre for Economic Performance, LSE. [Downloadable!]
    Other versions:
  2. Rita Asplund, 2004. "The Provision and Effects of Company Training. A brief review of the literature," Discussion Papers 907, The Research Institute of the Finnish Economy. [Downloadable!]
  3. Booth, Alison L & Zoega, Gylfi, 2000. "Why Do Firms Invest in General Training? 'Good' Firms and 'Bad' Firms as a Source of Monopsony Power," CEPR Discussion Papers 2536, C.E.P.R. Discussion Papers. [Downloadable!] (restricted)
    Other versions:
  4. Luca Nunziata, 2001. "Institutions and Wage Determination: a Multi-Country Approach," Economics Papers 2001-W29, Economics Group, Nuffield College, University of Oxford. [Downloadable!]
    Other versions:
  5. repec:ese:iserwp: is not listed on IDEAS
  6. Panos, Sousounis, 2009. "The Impact of Work-Related Training on Employee Earnings: Evidence from Great Britain," MPRA Paper 14262, University Library of Munich, Germany. [Downloadable!]
  7. Blunch, Niels-Hugo & Verner, Dorte, 2001. "Asymmetries in union relative wage effects in Ghanaian manufacturing - an analysis applying quantile regressions," Policy Research Working Paper Series 2570, The World Bank. [Downloadable!]
  8. Andrea Bassanini & Alison Booth & Giorgio Brunello & Maria De Paola & Edwin Leuven, 2005. "Workplace Training in Europe," IZA Discussion Papers 1640, Institute for the Study of Labor (IZA). [Downloadable!]
  9. Blunch, Niels-Hugo & Verner, Dorthe, 2001. "Assymetries in Union Relative Wage Effects in Ghanian Manufacturing - An analysis Applying Quantile Regressions," CLS Working Papers 01-7, University of Aarhus, Aarhus School of Business, Centre for Labour Market and Social Research. [Downloadable!]
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