IDEAS home Printed from https://ideas.repec.org/a/bla/scotjp/v55y2008i1p67-78.html
   My bibliography  Save this article

Training, Job Security And Incentive Wages

Author

Listed:
  • Margarita Katsimi

Abstract

This paper considers the optimal level of firm‐specific training by taking into account the positive effect of training on the expected duration of workers' current employment. In the framework of an efficiency wage model, a short expected job tenure represents a disamenity that reduces the penalty from shirking. As this disamenity increases, workers have an incentive to continue providing a positive level of effort only if they are compensated by a higher wage. We endogenize the employment separation rate by introducing firm‐specific training. Firm‐specific training creates a rent that is lost if the worker is separated from the firm. As a result, the firm will be more reluctant to fire its trained workforce in a recession. This implies that firm‐specific training can decrease current wages because it represents a commitment to lower future labour turnover.

Suggested Citation

  • Margarita Katsimi, 2008. "Training, Job Security And Incentive Wages," Scottish Journal of Political Economy, Scottish Economic Society, vol. 55(1), pages 67-78, February.
    • Handle: RePEc:bla:scotjp:v:55:y:2008:i:1:p:67-78
    DOI: 10.1111/j.1467-9485.2008.00442.x
    as

    Download full text from publisher

    File URL: https://doi.org/10.1111/j.1467-9485.2008.00442.x
    Download Restriction: no
    File URL: https://libkey.io/10.1111/j.1467-9485.2008.00442.x?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    Other versions of this item:

    References listed on IDEAS

    as
    1. Bai, Chong-en, 1997. "Earnings profile and monitoring under asymmetric information," Economics Letters, Elsevier, vol. 57(2), pages 219-225, December.
    2. Wadhwani, Sushil B & Wall, Martin, 1991. "A Direct Test of the Efficiency Wage Model Using UK Micro-data," Oxford Economic Papers, Oxford University Press, vol. 43(4), pages 529-548, October.
    3. Rosen, Sherwin, 2007. "Studies in Labor Markets," National Bureau of Economic Research Books, University of Chicago Press, number 9780226726304, August.
    4. Gary S. Becker, 1962. "Investment in Human Capital: A Theoretical Analysis," NBER Chapters, in: Investment in Human Beings, pages 9-49, National Bureau of Economic Research, Inc.
    5. Hart,Robert A. & Moutos,Thomas, 2008. "Human Capital, Employment and Bargaining," Cambridge Books, Cambridge University Press, number 9780521061032, July.
    6. Christian Dustmann & Costas Meghir, 2005. "Wages, Experience and Seniority," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 72(1), pages 77-108.
    7. Levine, David I, 1992. "Can Wage Increases Pay for Themselves? Tests with a Production Function," Economic Journal, Royal Economic Society, vol. 102(414), pages 1102-1115, September.
    8. Fella, Giulio, 2000. "Efficiency wage and efficient redundancy pay," European Economic Review, Elsevier, vol. 44(8), pages 1473-1490, August.
    9. Li, Elizabeth H, 1986. "Compensating Differentials for Cyclical and Noncyclical Unemployment: The Interaction between Investors' and Employees' Risk Aversion," Journal of Labor Economics, University of Chicago Press, vol. 4(2), pages 277-300, April.
    10. John M. Abowd & Orley Ashenfelter, 1980. "Anticipated Unemployment, Temporary Layoffs and Compensating Wage Differentials," Working Papers 517, Princeton University, Department of Economics, Industrial Relations Section..
    11. repec:bla:econom:v:56:y:1989:i:224:p:505-21 is not listed on IDEAS
    12. Obstfeld, Maurice, 1991. "A model of currency depreciation and the debt-inflation spiral," Journal of Economic Dynamics and Control, Elsevier, vol. 15(1), pages 151-177.
    13. Huang, Tzu-Ling & Hallam, Arne & Orazem, Peter & Paterno, Elizabeth M., 1998. "Empirical Tests of Efficiency Wage Models," Staff General Research Papers Archive 1325, Iowa State University, Department of Economics.
    14. Topel, Robert H, 1991. "Specific Capital, Mobility, and Wages: Wages Rise with Job Seniority," Journal of Political Economy, University of Chicago Press, vol. 99(1), pages 145-176, February.
    15. Hashimoto, Masanori, 1979. "Bonus Payments, on-the-Job Training, and Lifetime Employment in Japan," Journal of Political Economy, University of Chicago Press, vol. 87(5), pages 1086-1104, October.
    16. Hashimoto, Masanori, 1981. "Firm-Specific Human Capital as a Shared Investment," American Economic Review, American Economic Association, vol. 71(3), pages 475-482, June.
    17. John M. Abowd & Orley C. Ashenfelter, 1981. "Anticipated Unemployment, Temporary Layoffs, and Compensating Wage Differentials," NBER Chapters, in: Studies in Labor Markets, pages 141-170, National Bureau of Economic Research, Inc.
    18. Robert E. Hall, 1970. "Why Is the Unemployment Rate So High at Full Employment?," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 1(3), pages 369-410.
    19. Andrews, Martyn & Bradley, Steve & Upward, Richard, 1999. "Estimating Youth Training Wage Differentials during and after Training," Oxford Economic Papers, Oxford University Press, vol. 51(3), pages 517-544, July.
    20. Shapiro, Carl & Stiglitz, Joseph E, 1984. "Equilibrium Unemployment as a Worker Discipline Device," American Economic Review, American Economic Association, vol. 74(3), pages 433-444, June.
    21. James D. Adams, 1985. "Permanent Differences in Unemployment and Permanent Wage Differentials," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 100(1), pages 29-56.
    22. repec:bla:econom:v:65:y:1998:i:257:p:125-43 is not listed on IDEAS
    23. Parent, Daniel, 1999. "Wages and Mobility: The Impact of Employer-Provided Training," Journal of Labor Economics, University of Chicago Press, vol. 17(2), pages 298-317, April.
    24. Lynch, Lisa M, 1991. "The Role of Off-the-Job vs. On-the-Job Training for the Mobility of Women Workers," American Economic Review, American Economic Association, vol. 81(2), pages 151-156, May.
    25. Walter Y. Oi, 1962. "Labor as a Quasi-Fixed Factor," Journal of Political Economy, University of Chicago Press, vol. 70(6), pages 538-538.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Lössbroek, Jelle & Radl, Jonas, 2019. "Teaching older workers new tricks: workplace practices and gender training differences in nine European countries," EconStor Open Access Articles and Book Chapters, ZBW - Leibniz Information Centre for Economics, vol. 39(10), pages 2170-2193.
    2. Pierre Salmon, 2003. "The assignment of powers in an open-ended European Union," Post-Print hal-00445601, HAL.
    3. Richard Arend, 2014. "Social and Environmental Performance at SMEs: Considering Motivations, Capabilities, and Instrumentalism," Journal of Business Ethics, Springer, vol. 125(4), pages 541-561, December.
    4. Florian Baumann, 2010. "Severance Payments as a Commitment Device," Journal of Institutional and Theoretical Economics (JITE), Mohr Siebeck, Tübingen, vol. 166(4), pages 715-734, December.
    5. Jerzy Kaźmierczyk & Gulnara Fatykhovna Romashkina & Joanna Wyrwa, 2020. "The value of training and loyalty. A comparative analysis," Entrepreneurship and Sustainability Issues, VsI Entrepreneurship and Sustainability Center, vol. 8(1), pages 762-779, September.
    6. Dan Bernhardt & Steeve Mongrain, 2010. "The Layoff Rat Race," Scandinavian Journal of Economics, Wiley Blackwell, vol. 112(1), pages 185-210, March.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Rosen, Sherwin, 1985. "Implicit Contracts: A Survey," Journal of Economic Literature, American Economic Association, vol. 23(3), pages 1144-1175, September.
    2. repec:eee:labchp:v:3:y:1999:i:pb:p:2291-2372 is not listed on IDEAS
    3. Timothy E. Dore & Rebecca Zarutskie, 2017. "Firm Leverage, Labor Market Size, and Employee Pay," Finance and Economics Discussion Series 2017-078, Board of Governors of the Federal Reserve System (U.S.).
    4. Younghwan Song, 2009. "Training, Technological Changes, and Displacement," Journal of Labor Research, Springer, vol. 30(3), pages 201-218, September.
    5. David A. Matsa, 2018. "Capital Structure and a Firm’s Workforce," NBER Working Papers 25125, National Bureau of Economic Research, Inc.
    6. repec:eee:labchp:v:3:y:1999:i:pb:p:2373-2437 is not listed on IDEAS
    7. Francis Teal & Måns Söderbom, 2002. "Does firm size really affect earnings?," Economics Series Working Papers WPS/2002-08, University of Oxford, Department of Economics.
    8. repec:eee:labchp:v:2:y:1986:i:c:p:789-848 is not listed on IDEAS
    9. Dan A. Black & Lars Skipper & Jeffrey A. Smith & Jeffrey Andrew Smith, 2023. "Firm Training," CESifo Working Paper Series 10268, CESifo.
    10. repec:eee:labchp:v:1:y:1986:i:c:p:525-602 is not listed on IDEAS
    11. Vilhuber, Lars, 2001. "La spécificité de la formation en milieu de travail : un survol des contributions théoriques et empiriques récentes," L'Actualité Economique, Société Canadienne de Science Economique, vol. 77(1), pages 133-167, mars.
    12. William J. Carrington, 2015. "Do We Know Why Earnings Fall with Job Displacement? Working Paper: 2015-01," Working Papers 49908, Congressional Budget Office.
    13. Bhalotra, Sonia., 2003. "The impact of economic liberalization on employment and wages in India," ILO Working Papers 993650543402676, International Labour Organization.
    14. John R. Graham & Hyunseob Kim & Si Li & Jiaping Qiu, 2013. "Human Capital Loss In Corporate Bankruptcy," Working Papers 13-37, Center for Economic Studies, U.S. Census Bureau.
    15. Måns Söderbom & Francis Teal & Anthony Wambugu, 2002. "Does firm size really affect earnings?," CSAE Working Paper Series 2002-08, Centre for the Study of African Economies, University of Oxford.
    16. repec:ilo:ilowps:365054 is not listed on IDEAS
    17. Hagen, Tobias, 2001. "Do temporary workers receive risk-premiums? Assessing the wage effects of fixed-term contracts in West-Germany by matching estimators compared with parametric apporaches," ZEW Discussion Papers 01-71, ZEW - Leibniz Centre for European Economic Research.
    18. repec:eee:labchp:v:1:y:1986:i:c:p:641-692 is not listed on IDEAS
    19. Jean-Marc Robin & Costas Meghir & Christian Dustmann & Jerome Adda, 2013. "Career Progression, Economic Downturns, and Skills," 2013 Meeting Papers 993, Society for Economic Dynamics.
    20. Parent, Daniel, 1996. "Survol des contributions théoriques et empiriques liées au capital humain," L'Actualité Economique, Société Canadienne de Science Economique, vol. 72(3), pages 315-356, septembre.
    21. Florian S. Peters & Alexander F. Wagner, 2014. "The Executive Turnover Risk Premium," Journal of Finance, American Finance Association, vol. 69(4), pages 1529-1563, August.
    22. Shaw, Kathryn L, 1996. "An Empirical Analysis of Risk Aversion and Income Growth," Journal of Labor Economics, University of Chicago Press, vol. 14(4), pages 626-653, October.
    23. William J. Carrington & Bruce Fallick, 2014. "Why Do Earnings Fall with Job Displacement?," Working Papers (Old Series) 1405, Federal Reserve Bank of Cleveland.
    24. Dietz, Daniel & Zwick, Thomas, 2016. "The retention effect of training: Portability, visibility, and credibility," ZEW Discussion Papers 16-011, ZEW - Leibniz Centre for European Economic Research.
    25. Michael Waldman, 1988. "Interpreting Evidence on Returns to Tenure: The Significance of Quasi-Specific Human Capital," UCLA Economics Working Papers 479, UCLA Department of Economics.
    26. Emilia Del Bono & Andrea Weber, 2008. "Do Wages Compensate for Anticipated Working Time Restrictions? Evidence from Seasonal Employment in Austria," Journal of Labor Economics, University of Chicago Press, vol. 26(1), pages 181-221.

    More about this item

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:bla:scotjp:v:55:y:2008:i:1:p:67-78. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Wiley Content Delivery (email available below). General contact details of provider: https://edirc.repec.org/data/sesssea.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.