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Job raiding raises human capital investments

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  • BOSCHMANS, Kris
  • BOUCKAERT, Jan

Abstract

This paper studies job raiding and its effect on incentives to invest in human capital. A firm can offer more attractive wages to new hires than to its current employees, thereby raiding a rival’s workers. Our model shows that firms prefer to raid in equilibrium when given the opportunity to do so. As rational workers foresee that job raids increase expected job earnings, they are willing to increase their ex ante investment in human capital. This insight has important implications for any industry where human capital is a scarce input and important aspects of personnel output are observable. Examples include the publications of academic researchers, the performance of professional athletes, and lawsuits won by lawyers. Our conclusions indicate that limiting organizations’ freedom to offer higher wages to new hires vis-à-vis equally productive incumbent employees inhibits investments in human capital.

Suggested Citation

  • BOSCHMANS, Kris & BOUCKAERT, Jan, 2004. "Job raiding raises human capital investments," Working Papers 2004005, University of Antwerp, Faculty of Applied Economics.
  • Handle: RePEc:ant:wpaper:2004005
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    File URL: https://repository.uantwerpen.be/docman/irua/31c5db/f122f666.pdf
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    Cited by:

    1. Kim, Jin-Hyuk, 2007. "Employee Poaching, Predatory Hiring, and Covenants Not to Compete," MPRA Paper 83254, University Library of Munich, Germany.

    More about this item

    Keywords

    Job raiding; Human capital; Labor markets;

    JEL classification:

    • L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets
    • J63 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Turnover; Vacancies; Layoffs

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