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Is firm-sponsored training a palliative? A common agency approach

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  • H. Lasram
  • Didier G. Laussel

Abstract

We analyse the issue of firm-sponsored training under product market imperfections. In this setting, qualification becomes a public good for firms when their profits are increasing in the stock of skilled workers but remains a private good to students/workers. Students have to pay a tuition fee but at the same time firms sponsor education: universities sell training to both. We prove that the proportion of skilled workers is larger in more competitive economies/industries while the share of firms in the financing of training is a monotonically decreasing function of the degree of competition. An increase of the latter indeed increases the equilibrium skilled wage while reducing its sensitivity to an increase of the supply of skilled workers. The firms’ aggregate expenditures on training per worker are nevertheless a nonmonotonic function of the competitiveness of the economy.

Suggested Citation

  • H. Lasram & Didier G. Laussel, 2016. "Is firm-sponsored training a palliative? A common agency approach," Applied Economics, Taylor & Francis Journals, vol. 48(57), pages 5581-5592, December.
    • Handle: RePEc:taf:applec:v:48:y:2016:i:57:p:5581-5592
    DOI: 10.1080/00036846.2016.1181830
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    JEL classification:

    • D43 - Microeconomics - - Market Structure, Pricing, and Design - - - Oligopoly and Other Forms of Market Imperfection
    • I22 - Health, Education, and Welfare - - Education - - - Educational Finance; Financial Aid
    • J4 - Labor and Demographic Economics - - Particular Labor Markets
    • L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets

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