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Equilibrium Contracts and Firm-sponsored Training

  • Pontus Rendahl

This paper studies a model of firm-sponsored investments in general human capital. When institutional settings permit simple contractual arrangements that are consistent with at-will employment, firms invest in a worker's general skills. And when market forces discipline contracts, the equilibrium level of training intimately relates to any match-specific component of surplus, such as mobility costs. If these relation-specific components are sufficiently large, all externalities may be internalized, and training attains the social optimum. In marked contrast to the existing literature, these predictions do not rely on complementarities between training and rents (e.g. “wage-compression"), and they are independent of the distribution of profits and wages.

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File URL: http://www.econ.cam.ac.uk/research/repec/cam/pdf/cwpe1336.pdf
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Paper provided by Faculty of Economics, University of Cambridge in its series Cambridge Working Papers in Economics with number 1336.

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Date of creation: 07 Oct 2013
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Handle: RePEc:cam:camdae:1336
Contact details of provider: Web page: http://www.econ.cam.ac.uk/index.htm

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  1. Joseph G. Altonji & Nicolas Williams, 2005. "Do Wages Rise with Job Seniority? A Reassessment," ILR Review, Cornell University, ILR School, vol. 58(3), pages 370-397, April.
  2. Katz, Eliakim & Ziderman, Adrian, 1990. "Shared investment in general training : the role of information," Policy Research Working Paper Series 535, The World Bank.
  3. Anke S. Kessler & Christoph Lülfesmann, 2006. "The Theory of Human Capital Revisited: on the Interaction of General and Specific Investments," Economic Journal, Royal Economic Society, vol. 116(514), pages 903-923, October.
  4. Hart, Oliver D. & Moore, John, 1990. "Property Rights and the Nature of the Firm," Scholarly Articles 3448675, Harvard University Department of Economics.
  5. Picchio, Matteo & van Ours, Jan C., 2011. "Market imperfections and firm-sponsored training," Labour Economics, Elsevier, vol. 18(5), pages 712-722, October.
  6. Edlin, Aaron S & Reichelstein, Stefan, 1996. "Holdups, Standard Breach Remedies, and Optimal Investment," American Economic Review, American Economic Association, vol. 86(3), pages 478-501, June.
  7. John M. Barron & Mark C. Berger & Dan A. Black, 1997. "On-the-Job Training," Books from Upjohn Press, W.E. Upjohn Institute for Employment Research, number ojt.
  8. Robert H. Topel, 1990. "Specific Capital, Mobility, and Wages: Wages Rise with Job Seniority," NBER Working Papers 3294, National Bureau of Economic Research, Inc.
  9. Klein, Benjamin & Crawford, Robert G & Alchian, Armen A, 1978. "Vertical Integration, Appropriable Rents, and the Competitive Contracting Process," Journal of Law and Economics, University of Chicago Press, vol. 21(2), pages 297-326, October.
  10. Goux, Dominique & Maurin, Eric, 2000. "Returns to firm-provided training: evidence from French worker-firm matched data1," Labour Economics, Elsevier, vol. 7(1), pages 1-19, January.
  11. Brunello, Giorgio & Gambarotto, Francesca, 2007. "Do spatial agglomeration and local labor market competition affect employer-provided training? Evidence from the UK," Regional Science and Urban Economics, Elsevier, vol. 37(1), pages 1-21, January.
  12. Abraham, Katharine G & Farber, Henry S, 1987. "Job Duration, Seniority, and Earnings," American Economic Review, American Economic Association, vol. 77(3), pages 278-97, June.
  13. Klein, Benjamin & Leffler, Keith B, 1981. "The Role of Market Forces in Assuring Contractual Performance," Journal of Political Economy, University of Chicago Press, vol. 89(4), pages 615-41, August.
  14. Chang, Chun & Wang, Yijiang, 1996. "Human Capital Investment under Asymmetric Information: The Pigovian Conjecture Revisited," Journal of Labor Economics, University of Chicago Press, vol. 14(3), pages 505-19, July.
  15. Harley Frazis & Maury Gittleman & Mary Joyce, 2000. "Correlates of Training: An Analysis Using Both Employer and Employee Characteristics," ILR Review, Cornell University, ILR School, vol. 53(3), pages 443-462, April.
  16. MacLeod, W Bentley & Malcomson, James M, 1993. "Investments, Holdup, and the Form of Market Contracts," American Economic Review, American Economic Association, vol. 83(4), pages 811-37, September.
  17. Loewenstein, Mark A & Spletzer, James R, 1998. "Dividing the Costs and Returns to General Training," Journal of Labor Economics, University of Chicago Press, vol. 16(1), pages 142-71, January.
  18. Daron Acemoglu, 1997. "Training and Innovation in an Imperfect Labour Market," Review of Economic Studies, Oxford University Press, vol. 64(3), pages 445-464.
  19. Felipe Balmaceda, 2005. "Firm-Sponsored General Training," Journal of Labor Economics, University of Chicago Press, vol. 23(1), pages 115-134, January.
  20. Barron, John M & Black, Dan A & Loewenstein, Mark A, 1989. "Job Matching and On-the-Job Training," Journal of Labor Economics, University of Chicago Press, vol. 7(1), pages 1-19, January.
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