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Work practices, incentives for skills, and training

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  • Prasad, Suraj
  • Tran, Hien

Abstract

We study a worker's incentives to invest in non-verifiable skills. We do this within the context of recent innovative work practices, where jobs have become more flexible. When jobs are flexible, standard approaches in the literature for firms to credibly reward skills (i.e. committing ex-ante to a contract that ties wages to jobs) may not be feasible. We suggest an alternative approach: firms promote workers only when they acquire both firm specific skills and general skills. This promotion scheme reveals information about the general skill to competing firms, which in turn allows the firm to credibly reward firm specific skills. Firms thus have an incentive to pay for general training to induce firm specific skills and they are more likely to pay for it when jobs are flexible.

Suggested Citation

  • Prasad, Suraj & Tran, Hien, 2013. "Work practices, incentives for skills, and training," Labour Economics, Elsevier, vol. 23(C), pages 66-76.
  • Handle: RePEc:eee:labeco:v:23:y:2013:i:c:p:66-76
    DOI: 10.1016/j.labeco.2013.03.003
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    Keywords

    Incentives; Skills; Training; Contracts; Promotions;

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