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Employer Incentives for Providing Informal On-the-job Training in the Presence of On-the-job Search

Author

Listed:
  • Seung-Gyu Sim

    (University of Wisconsin-Madison)

  • Tim Huegerich

    (Laurits R. Christensen Associates)

Abstract

We analyze the provision of informal general training in a frictional labor market in which employers cannot commit to training levels and workers cannot commit to stay. We demonstrate that employers’ training decisions are driven by both an investment motive, to improve productivity, and a compensation motive, to increase employee retention. The investment motive decreases with higher wages, while the compensation motive increases. In our calibration exercises, the former dominates, which creates a negative relationship between wages and training. Furthermore, in contrast to recent studies missing the compensation motive, lessening the search frictions raises overall training levels due to enhanced compensation motives, approaching Becker’s result for a frictionless labor market.

Suggested Citation

  • Seung-Gyu Sim & Tim Huegerich, 2018. "Employer Incentives for Providing Informal On-the-job Training in the Presence of On-the-job Search," Journal of Labor Research, Springer, vol. 39(1), pages 22-40, March.
    • Handle: RePEc:spr:jlabre:v:39:y:2018:i:1:d:10.1007_s12122-018-9261-3
    DOI: 10.1007/s12122-018-9261-3
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    References listed on IDEAS

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    More about this item

    Keywords

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    JEL classification:

    • D83 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Search; Learning; Information and Knowledge; Communication; Belief; Unawareness
    • E24 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Employment; Unemployment; Wages; Intergenerational Income Distribution; Aggregate Human Capital; Aggregate Labor Productivity
    • J24 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Human Capital; Skills; Occupational Choice; Labor Productivity
    • J33 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Compensation Packages; Payment Methods
    • J64 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Unemployment: Models, Duration, Incidence, and Job Search

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