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Why Do Firms Invest in General Training? 'Good' Firms and 'Bad' Firms as a Source of Monopsony Power

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  • Booth, Alison L
  • Zoega, Gylfi

Abstract

We develop a model demonstrating conditions under which firms will invest in the general training of their workers, and show that firms’ incentives to invest in general training are increasing in task complexity. Workers’ heterogeneous observable innate ability affects the variety of tasks that can be performed within a firm. This gives monopsony power to firms with ‘better’ workforces. As a result such firms are willing to expend resources to provide workers with general training. Since the degree of monopsony power is increasing with task complexity, firms whose workforces undertake more sophisticated tasks are more willing to finance general training. We conclude that training will take place in better-than-average firms, while bad firms will have underperforming but overpaid workers that are not likely to be trained by their current employer.

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Bibliographic Info

Paper provided by C.E.P.R. Discussion Papers in its series CEPR Discussion Papers with number 2536.

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Date of creation: Aug 2000
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Handle: RePEc:cpr:ceprdp:2536

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Related research

Keywords: Firm-Financed General Training; Hierarchical Assignment Models; Monopsony;

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References

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  1. Hamilton, Jonathan & Thisse, Jacques-François & Zenou, Yves, 1999. "Wage Competition with Heterogeneous Workers and Firms," CEPR Discussion Papers 2141, C.E.P.R. Discussion Papers.
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  3. David H. Autor, 2000. "Why Do Temporary Help Firms Provide Free General Skills Training?," NBER Working Papers 7637, National Bureau of Economic Research, Inc.
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  16. Daron Acemoglu & Jorn-Steffen Pischke, 1998. "The Structure of Wages and Investment in General Training," NBER Working Papers 6357, National Bureau of Economic Research, Inc.
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Citations

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Cited by:
  1. William Collier & Francis Green & Young-Bae Kim & John Peirson, 2008. "Education, Training and Economic Performance: Evidence from Establishment Survival Data," Studies in Economics 0822, Department of Economics, University of Kent.
  2. Nadège Marchand & Claude Montmarquette, 2008. "Training Without Certification :An Experimental Study," Post-Print halshs-00333521, HAL.
  3. Laurence Nayman & Jacques Mairesse & Sylvie Le Laidier & Vincent Delbecque, 2011. "L’évaluation des investissements incorporels en France : méthodes et premiers résultats," Économie et Statistique, Programme National Persée, vol. 450(1), pages 3-27.
  4. Uschi Backes-Gellner & Shiho Futagami & Silvia Teuber & Andrea Willi, 2013. "Differences in Initial Training and Wages of Japanese Engineering and Retailing Companies - Who Pays for Higher Training Costs?," Economics of Education Working Paper Series 0090, University of Zurich, Institute for Strategy and Business Economics (ISU).
  5. Giorgio Brunello & Maria De Paola, 2004. "Market Failures and the Under-Provision of Training," CESifo Working Paper Series 1286, CESifo Group Munich.
  6. Christian Pfeifer & Simon Janssen & Philip Yang & Uschi Backes-Gellner, 2010. "Training Participation of an Aging Workforce in an Internal Labor Market," Working Paper Series in Economics 170, University of Lüneburg, Institute of Economics.
  7. 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.
  8. 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.
  9. Carlos Peraita, 2005. "Firm-sponsored training in regulated labour markets: evidence from Spain," Applied Economics, Taylor & Francis Journals, vol. 37(16), pages 1885-1898.
  10. 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).
  11. Carlos Peraita, 2001. "Firm Sponsored Training In Regulated Labor Markets: Evidence From Spain," Working Papers. Serie EC 2001-15, Instituto Valenciano de Investigaciones Económicas, S.A. (Ivie).
  12. Christos Bilanakos, 2011. "Career Concerns and Firm – Sponsored General Training," University of Cyprus Working Papers in Economics 07-2011, University of Cyprus Department of Economics.
  13. Anette Boom, . "Firms' Investments in General Training and the Market for Skilled Labour," Papers 013, Departmental Working Papers.

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