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A Product Market Theory of Worker Training

Author

Listed:
  • Hans Gersbach

    (CER-ETH - Center of Economic Research, ETH Zurich)

  • Armin Schmutzler

    (Socioeconomic Institute, University of Zurich)

Abstract

We develop a product market theory that explains why firms invest in general training of their workers. We consider a model where firms first decide whether to invest in general human capital, then make wage offers for each others� trained employees and finally engage in imperfect product market competition. Equilibria with and without training, and multiple equilibria can emerge. If competition is suffciently soft and trained workers are substitutes, firms may invest in non-specific training if others do the same, because they would otherwise suffer a competitive disadvantage or need to pay high wages in order to attract trained workers. Government intervention can be socially desirable to turn training into a focal equilibrium.

Suggested Citation

  • Hans Gersbach & Armin Schmutzler, 2002. "A Product Market Theory of Worker Training," SOI - Working Papers 0214, Socioeconomic Institute - University of Zurich, revised Jan 2003.
    • Handle: RePEc:soz:wpaper:0214
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    References listed on IDEAS

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    Cited by:

    1. Bassanini, Andrea & Brunello, Giorgio, 2011. "Barriers to entry, deregulation and workplace training: A theoretical model with evidence from Europe," European Economic Review, Elsevier, vol. 55(8), pages 1152-1176.
    2. Anette Boom, "undated". "Firms' Investments in General Training and the Market for Skilled Labour," Papers 013, Departmental Working Papers.
    3. Bornemann, Stefan, 2005. "Spillovers in Vocational Training," Discussion Papers in Economics 693, University of Munich, Department of Economics.
    4. Gersbach, Hans & Schmutzler, Armin, 2001. "A Product Market Theory of Worker Training," IZA Discussion Papers 327, Institute of Labor Economics (IZA).
    5. Anke S. Kessler & Christoph Lülfesmann, 2006. "The Theory of Human Capital Revisited: on the Interaction of General and Specific Investments," Economic Journal, Royal Economic Society, vol. 116(514), pages 903-923, October.
    6. Bilanakos, Christos, 2013. "Career concerns and firm – sponsored general training," Research in Economics, Elsevier, vol. 67(2), pages 117-132.
    7. Boom, Anette, 2005. "Firms' investments in general training and the skilled labour market," Labour Economics, Elsevier, vol. 12(6), pages 781-805, December.
    8. Gersbach, Hans & Schmutzler, Armin, 2005. "The Effects of Globalization on Worker Training," CEPR Discussion Papers 4879, C.E.P.R. Discussion Papers.
    9. Simon Loertscher & Yves Schneider, 2005. "Switching Costs, Firm Size, and Market Structure," SOI - Working Papers 0508, Socioeconomic Institute - University of Zurich.
    10. 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.
    11. Giorgio Brunello, 2006. "Workplace Training and Labour Market Institutions in Europe," ifo DICE Report, ifo Institute - Leibniz Institute for Economic Research at the University of Munich, vol. 4(4), pages 33-41, 02.
    12. 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.

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    More about this item

    Keywords

    general training; human capital; oligopoly; turnover;
    All these keywords.

    JEL classification:

    • D42 - Microeconomics - - Market Structure, Pricing, and Design - - - Monopoly
    • L22 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Firm Organization and Market Structure
    • L43 - Industrial Organization - - Antitrust Issues and Policies - - - Legal Monopolies and Regulation or Deregulation
    • L92 - Industrial Organization - - Industry Studies: Transportation and Utilities - - - Railroads and Other Surface Transportation

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