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Equilibrium Contracts and Firm-sponsored Training

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  • Pontus Rendahl

Abstract

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.

Suggested Citation

  • Pontus Rendahl, 2013. "Equilibrium Contracts and Firm-sponsored Training," Cambridge Working Papers in Economics 1336, Faculty of Economics, University of Cambridge.
  • Handle: RePEc:cam:camdae:1336
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    File URL: http://www.econ.cam.ac.uk/research-files/repec/cam/pdf/cwpe1336.pdf
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    References listed on IDEAS

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    More about this item

    Keywords

    Human capital; On-the-job training; Contracts and Reputations.;
    All these keywords.

    JEL classification:

    • D21 - Microeconomics - - Production and Organizations - - - Firm Behavior: Theory
    • J24 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Human Capital; Skills; Occupational Choice; Labor Productivity
    • J41 - Labor and Demographic Economics - - Particular Labor Markets - - - Labor Contracts
    • M52 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Personnel Economics - - - Compensation and Compensation Methods and Their Effects
    • M53 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Personnel Economics - - - Training

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