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The Transfer of Human Capital

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  • Boyan Jovanovic
  • Yaw Nyarko

Abstract

Most of our productive knowledge was handed down to us by previous generations. The transfer of knowledge from the old to the young is therefore a cornerstone of productivity growth. We study this process in a model in which the old sell knowledge to the young - - old workers train the young, and charge them for this service. We take an information-theoretic approach in which training occurs if a young agent watches an old worker perform a task. This assumption has plenty of empirical support -- in their first three months on the job, young workers spend about five times as long watching others work as they do in formal training programs. Equilibrium is not constrained Pareto optimal. The old have private information, and this gives rise to an adverse selection problem: some old agents manage to sell skills that the young would not buy (if only they knew exactly what they were buying). We derive the implications for the lifetime of technological lines, and we show that the model generates a negative relation between a firm's productivity and its probability of failure.

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Bibliographic Info

Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 4823.

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Date of creation: Aug 1994
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Publication status: published as Journal of Economic Dynamics and Control, Vol. 19 (June 1995), pp. 1033-106 4
Handle: RePEc:nbr:nberwo:4823

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  1. Prescott, Edward C & Boyd, John H, 1987. "Dynamic Coalitions: Engines of Growth," American Economic Review, American Economic Association, American Economic Association, vol. 77(2), pages 63-67, May.
  2. Barron, John M & Black, Dan A & Loewenstein, Mark A, 1989. "Job Matching and On-the-Job Training," Journal of Labor Economics, University of Chicago Press, University of Chicago Press, vol. 7(1), pages 1-19, January.
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