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Training, Rent-Sharing and Unions

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Author Info

  • Booth, Alison L
  • Francesconi, Marco
  • Zoega, Gylfi

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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Bibliographic 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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References

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  1. 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.
  2. 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.
  3. 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.
  4. 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.
  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.
  6. Acemoglu, D. & Pischki, J.S., 1996. "Why Do Firms Train? Theory and Evidence," Working papers 96-7, Massachusetts Institute of Technology (MIT), Department of Economics.
  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.
  9. Chiu, Y Stephen, 1998. "Noncooperative Bargaining, Hostages, and Optimal Asset Ownership," American Economic Review, American Economic Association, vol. 88(4), pages 882-901, September.
  10. Klemperer, Paul, 1995. "Competition When Consumers Have Switching Costs: An Overview with Applications to Industrial Organization, Macroeconomics, and International Trade," Review of Economic Studies, Wiley Blackwell, vol. 62(4), pages 515-39, October.
  11. Booth, Alison L. & Chatterji, Monojit, 1996. "Unions and efficient training," ISER Working Paper Series 96-13, Institute for Social and Economic Research.
  12. 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.
  13. Booth, Alison L & Zoega, Gylfi, 1999. "Do Quits Cause Under-Training?," Oxford Economic Papers, Oxford University Press, vol. 51(2), pages 374-86, April.
  14. 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.
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Citations

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Cited by:
  1. Luca Nunziata, 2001. "Institutions and Wage Determination: a Multi-Country Approach," Economics Series Working Papers 2001-W29, University of Oxford, Department of Economics.
  2. 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.
  3. Lorraine Dearden & Howard Reed & John Van Reenen, 2006. "The Impact of Training on Productivity and Wages: Evidence from British Panel Data," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 68(4), pages 397-421, 08.
  4. 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.
  5. Rita Asplund, 2005. "The Provision and Effects of Company Training: A Brief Review of the Literature," Nordic Journal of Political Economy, Nordic Journal of Political Economy, vol. 31, pages 47-73.
  6. Bassanini, Andrea & Booth, Alison L. & Brunello, Giorgio & De Paola, Maria & Leuven, Edwin, 2005. "Workplace Training in Europe," IZA Discussion Papers 1640, Institute for the Study of Labor (IZA).
  7. Giorgio Brunello & Francesca Gambarotto, 2004. "Agglomeration Effects on Employer-Provided Training: Evidence from the UK," CESifo Working Paper Series 1150, CESifo Group Munich.
  8. Giorgio Brunello & Maria De Paola, 2004. "Market Failures and the Under-Provision of Training," CESifo Working Paper Series 1286, CESifo Group Munich.
  9. Giuseppe Croce, 2005. "A model of training policies in an imperfectly competitive labour market," Working Papers 90, University of Rome La Sapienza, Department of Public Economics.
  10. 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.
  11. Asplund, Rita, 2004. "The Provision and Effects of Company Training. A brief review of the literature," Discussion Papers 907, The Research Institute of the Finnish Economy.
  12. Böheim, René & Booth, Alison L., 2001. "The impact of bargaining institutions on employer-provided training in Britain," ISER Working Paper Series 2001-08, Institute for Social and Economic Research.
  13. Panos, Sousounis, 2009. "The Impact of Work-Related Training on Employee Earnings: Evidence from Great Britain," MPRA Paper 14262, University Library of Munich, Germany.

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