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Cost-Sharing of General and Specific Training with Depreciation of Human Capital

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  • Pichler, Eva

Abstract

The paper demonstrates that in a two-period model with imperfect capital markets firms will share the costs and returns of general training if human capital depreciates over time. Analyzing the firm's choice of the level of investment and the sharing-rule, it is shown that in spite of cost-sharing there will be an inefficient provision of general training: firms will economize on training in order to reduce workers' expected gain from quitting. If training is both general and firm-specific, overinvestment in firm-specific training will result.

Suggested Citation

  • Pichler, Eva, 1991. "Cost-Sharing of General and Specific Training with Depreciation of Human Capital," Department of Economics Working Paper Series 7, WU Vienna University of Economics and Business.
    • Handle: RePEc:wiw:wus005:6280
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    File URL: https://epub.wu.ac.at/6280/
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    1. Hashimoto, Masanori, 1981. "Firm-Specific Human Capital as a Shared Investment," American Economic Review, American Economic Association, vol. 71(3), pages 475-482, June.
    2. 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 1147-1158, December.
    3. Joseph G. Altonji & Robert A. Shakotko, 1987. "Do Wages Rise with Job Seniority?," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 54(3), pages 437-459.
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    5. Katz, Eliakim & Ziderman, Adrian, 1990. "Shared investment in general training : the role of information," Policy Research Working Paper Series 535, The World Bank.
    6. 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, vol. 7(1), pages 1-19, January.
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