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Worker Reciprocity and Employer Investment in Training

Author

Listed:
  • Edwin Leuven
  • Hessel Oosterbeek
  • Randolph Sloof
  • Chris van Klaveren

Abstract

Standard economic theory predicts that firms will not invest in general training and will underinvest in specific training. Empirical evidence, however, indicates that firms do invest in general training of their workers. Evidence from laboratory experiments points to less underinvestment in specific training than theory predicts. We propose a simple model in which a firm invests the socially optimal amounts in general and specific training if the worker is sufficiently motivated by reciprocity. A reciprocal worker may be willing to give the firm a full return on its investment. We present empirical evidence that supports the proposed mechanism. Workers with a high sensitivity to reciprocity have 15% higher training rates than workers with a low sensitivity to reciprocity. Copyright (c) The London School of Economics and Political Science 2005.

Suggested Citation

  • Edwin Leuven & Hessel Oosterbeek & Randolph Sloof & Chris van Klaveren, 2005. "Worker Reciprocity and Employer Investment in Training," Economica, London School of Economics and Political Science, vol. 72(285), pages 137-149, February.
  • Handle: RePEc:bla:econom:v:72:y:2005:i:285:p:137-149
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    References listed on IDEAS

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    1. Ernst Fehr & Simon Gächter, 2000. "Fairness and Retaliation: The Economics of Reciprocity," Journal of Economic Perspectives, American Economic Association, vol. 14(3), pages 159-181, Summer.
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    4. Gary S. Becker, 1962. "Investment in Human Capital: A Theoretical Analysis," Journal of Political Economy, University of Chicago Press, vol. 70, pages 1-9.
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    6. Steven Shavell, 1980. "Damage Measures for Breach of Contract," Bell Journal of Economics, The RAND Corporation, vol. 11(2), pages 466-490, Autumn.
    7. Daron Acemoglu & Jorn-Steffen Pischke, 1999. "The Structure of Wages and Investment in General Training," Journal of Political Economy, University of Chicago Press, vol. 107(3), pages 539-572, June.
    8. Aghion, Philippe & Dewatripont, Mathias & Rey, Patrick, 1994. "Renegotiation Design with Unverifiable Information," Econometrica, Econometric Society, vol. 62(2), pages 257-282, March.
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    10. Booth, Alison L. & Bryan, Mark L., 2002. "Who Pays for General Training? New Evidence for British Men and Women," IZA Discussion Papers 486, Institute for the Study of Labor (IZA).
    11. Stevens, Margaret, 1994. "A Theoretical Model of On-the-Job Training with Imperfect Competition," Oxford Economic Papers, Oxford University Press, vol. 46(4), pages 537-562, October.
    12. Katz, Eliakim & Ziderman, Adrian, 1990. "Shared investment in general training : the role of information," Policy Research Working Paper Series 535, The World Bank.
    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 1147-1158, December.
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    Citations

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    Cited by:

    1. Allen, J.P. & van der Velden, R.K.W., 2012. "Skills for the 21st century: implications for education," Research Memorandum 043, Maastricht University, Maastricht Research School of Economics of Technology and Organization (METEOR).
    2. Florian Englmaier & Stephen Leider, 2012. "Contractual and Organizational Structure with Reciprocal Agents," American Economic Journal: Microeconomics, American Economic Association, vol. 4(2), pages 146-183, May.
    3. Gerald Pruckner & Rupert Sausgruber, 2006. "A natural field experiment on newspaper purchasing," Natural Field Experiments 00320, The Field Experiments Website.
    4. 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.
    5. Uwe Jirjahn & Vanessa Lange, 2015. "Reciprocity and Workers’ Tastes for Representation," Journal of Labor Research, Springer, vol. 36(2), pages 188-209, June.
    6. Florian Englmaier & Katharina Schüßler, 2015. "Complementarities of HRM Practices - A Case for Employing Multiple Methods and Integrating Multiple Fields," CESifo Working Paper Series 5249, CESifo Group Munich.
    7. Florian Englmaier & Stephen G. Leider, 2012. "Managerial Payoff and Gift Exchange in the Field," CESifo Working Paper Series 3707, CESifo Group Munich.
    8. Damiani, Mirella & Ricci, Andrea, 2016. "Training, quality of management and firm level bargaining," MPRA Paper 72209, University Library of Munich, Germany.
    9. Nadège Marchand & Claude Montmarquette, 2008. "Training Without Certification: An Experimental Study," CIRANO Working Papers 2008s-01, CIRANO.
    10. Bilanakos, Christos, 2013. "Career concerns and firm – sponsored general training," Research in Economics, Elsevier, vol. 67(2), pages 117-132.
    11. Sascha Becker & Dolores Messer & Stefan C. Wolter, 2011. "A Gift is not Always a Gift: Gift Exchange in a Voucher Experiment," CESifo Working Paper Series 3488, CESifo Group Munich.
    12. Montizaan, Raymond & de Grip, Andries & Fouarge, Didier, 2015. "Training Access, Reciprocity, and Expected Retirement Age," IZA Discussion Papers 8862, Institute for the Study of Labor (IZA).
    13. Fahn, Matthias & Schade, Anne & Schüßler, Katharina, 2017. "Gift exchange vs. repeated interaction as a source of reciprocal behavior," Annual Conference 2017 (Vienna): Alternative Structures for Money and Banking 168150, Verein für Socialpolitik / German Economic Association.
    14. 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.
    15. Ruud Gerards & Andries de Grip & Maaike Witlox, 2014. "'Employability-miles' and worker employability awareness," Applied Economics, Taylor & Francis Journals, vol. 46(9), pages 952-965, March.
    16. Sauermann, Jan, 2015. "Worker Reciprocity and the Returns to Training: Evidence from a Field Experiment," IZA Discussion Papers 9179, Institute for the Study of Labor (IZA).
    17. repec:sgh:gosnar:y:2017:i:5:p:105-127 is not listed on IDEAS
    18. Van den Berge, Wiljan & Jongen, Egbert L. W. & van der Wiel, Karen, 2017. "Using Tax Deductions to Promote Lifelong Learning: Real and Shifting Responses," IZA Discussion Papers 10885, Institute for the Study of Labor (IZA).
    19. Damiani, Mirella & Ricci, Andrea, 2016. "Training, quality of management and firm level bargaining," MPRA Paper 72138, University Library of Munich, Germany.
    20. Sascha O. Becker & Dolores Messer & Stefan C. Wolter, 2013. "A Gift is Not Always a Gift: Heterogeneity and Long-term Effects in a Gift Exchange Experiment," Economica, London School of Economics and Political Science, vol. 80(318), pages 345-371, April.
    21. Englmaier, Florian & Kolaska, Thomas & Leider, Stephen, 2015. "Reciprocity in Organisations," Discussion Paper Series of SFB/TR 15 Governance and the Efficiency of Economic Systems 504, Free University of Berlin, Humboldt University of Berlin, University of Bonn, University of Mannheim, University of Munich.
    22. Matthias Fahn & Anne Schade & Katharina Schüßler, 2017. "What Drives Reciprocal Behavior? The Optimal Provision of Incentives over the Course of Careers," CESifo Working Paper Series 6635, CESifo Group Munich.
    23. Englmaier, Florian & Schüßler, Katharina, 2015. "Complementarities of HRM Practices," Discussion Paper Series of SFB/TR 15 Governance and the Efficiency of Economic Systems 503, Free University of Berlin, Humboldt University of Berlin, University of Bonn, University of Mannheim, University of Munich.
    24. Naoki Shintoyo, 2010. "Worker-financed versus Firm-sponsored Training: How are Skilled Workers Supplied to the Economy?," Economica, London School of Economics and Political Science, vol. 77(305), pages 110-127, January.

    More about this item

    JEL classification:

    • J41 - Labor and Demographic Economics - - Particular Labor Markets - - - Labor Contracts

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