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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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Author Info
Alison L. Booth () (Institute for Social and Economic Research, University of Essex, UK)
Gylfi Zoega (Birkbeck College)

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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' heterogenous observable innate ability affects the variety of tasks that can be performed within a firm. This gives monopsony poewr 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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Paper provided by Institute for Labour Research in its series ILR working papers with number 058.

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Length: 34
Date of creation: Jul 2000
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Handle: RePEc:esl:ilrdps:058

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Postal: Institute for Labour Research University of Essex, Wivenhoe Park Colchester, Essex CO4 3SQ UK
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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.:
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  12. Sattinger, Michael, 1993. "Assignment Models of the Distribution of Earnings," Journal of Economic Literature, American Economic Association, vol. 31(2), pages 831-80, June. [Downloadable!] (restricted)
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  14. 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)
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  20. Booth, Alison L & Zoega, Gylfi, 1999. "Do Quits Cause Under-Training?," Oxford Economic Papers, Oxford University Press, vol. 51(2), pages 374-86, April.
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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. 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!]
  2. Nadège Marchand & Claude Montmarquette, 2008. "Training Without Certification: An Experimental Study," CIRANO Working Papers 2008s-01, CIRANO. [Downloadable!]
    Other versions:
  3. 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). [Downloadable!]
  4. 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!]
  5. 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. [Downloadable!]
  6. Anette Boom, . "Firms' Investments in General Training and the Market for Skilled Labour," Papers 013, Departmental Working Papers. [Downloadable!]
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