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A Product Market Theory of Worker Training

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Author Info
Hans Gersbach () (CER-ETH - Center of Economic Research, ETH Zurich)
Armin Schmutzler () (Socioeconomic Institute, University of Zurich)

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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.

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File URL: http://www.soi.uzh.ch/research/wp/2002/wp0214.pdf
File Format: application/pdf
File Function: Revised version, 2003
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Publisher Info
Paper provided by University of Zurich, Socioeconomic Institute in its series Working Papers with number 0214.

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Length: 31 pages
Date of creation: Nov 2002
Date of revision: Jan 2003
Handle: RePEc:soz:wpaper:0214

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Related research
Keywords: general training; human capital; oligopoly; turnover;

Other versions of this item:

Find related papers by JEL classification:
D42 - Microeconomics - - Market Structure and Pricing - - - 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

References listed on IDEAS
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. 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. [Downloadable!] (restricted)
    Other versions:
  2. Gersbach, Hans & Schmutzler, Armin, 2001. "A Product Market Theory of Training and Turnover in Firms," IZA Discussion Papers 327, Institute for the Study of Labor (IZA). [Downloadable!]
  3. Goux, Dominique & Maurin, Eric, 2000. "Returns to firm-provided training: evidence from French worker-firm matched data1," Labour Economics, Elsevier, vol. 7(1), pages 1-19, January. [Downloadable!] (restricted)
  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. [Downloadable!] (restricted)
  5. Acemoglu, Daron & Pischke, Jörn-Steffen, 1998. "The Structure of Wages and Investment in General Training," CEPR Discussion Papers 1833, C.E.P.R. Discussion Papers. [Downloadable!] (restricted)
    Other versions:
  6. Loewenstein, Mark A & Spletzer, James R, 1998. "Dividing the Costs and Returns to General Training," Journal of Labor Economics, University of Chicago Press, vol. 16(1), pages 142-71, January. [Downloadable!] (restricted)
  7. Acemoglu, Daron & Pischke, Jorn-Steffen, 1999. "Beyond Becker: Training in Imperfect Labour Markets," Economic Journal, Royal Economic Society, vol. 109(453), pages F112-42, February. [Downloadable!] (restricted)
    Other versions:
  8. 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. [Downloadable!] (restricted)
  9. Lars Vilhuber, 1997. "Sector-Specific On-the-Job Training: Evidence from U.S. Data," CIRANO Working Papers 97s-42, CIRANO. [Downloadable!]
  10. Abe Yukiko, 1994. "Specific Capital, Adverse Selection, and Turnover: A Comparison of the United States and Japan," Journal of the Japanese and International Economies, Elsevier, vol. 8(3), pages 272-292, September. [Downloadable!] (restricted)
  11. Lars Vilhuber, 1999. "Sector-Specific Training and Mobility in Germany," CIRANO Working Papers 99s-03, CIRANO. [Downloadable!]
  12. Prendergast, Canice, 1992. "Career development and specific human capital collection," Journal of the Japanese and International Economies, Elsevier, vol. 6(3), pages 207-227, September. [Downloadable!] (restricted)
  13. Katz, Eliakim & Ziderman, Adrian, 1990. "Investment in General Training: The Role of Information and Labour Mobility," Economic Journal, Royal Economic Society, vol. 100(403), pages 1147-58, December. [Downloadable!] (restricted)
  14. Acemoglu, Daron, 1997. "Training and Innovation in an Imperfect Labour Market," Review of Economic Studies, Blackwell Publishing, vol. 64(3), pages 445-64, July. [Downloadable!] (restricted)
  15. Chun Chang & Wang, Yijiang, 1995. "A framework for understanding differences in labor turnover and human capital investment," Journal of Economic Behavior & Organization, Elsevier, vol. 28(1), pages 91-105, September. [Downloadable!] (restricted)
Full references

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, 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. [Downloadable!]
  2. 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!]
  3. Bornemann, Stefan, 2005. "Spillovers in Vocational Training," Discussion Papers in Economics 693, University of Munich, Department of Economics. [Downloadable!]
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