Labor Market Search and Schooling Investment
We generalize the standard search, matching, and bargaining framework to allow individuals to acquire productivity-enhancing schooling prior to labor market entry. As is well-known, search frictions and weakness in bargaining position contribute to under-investment from an efficiency perspective. In order to evaluate the sensitivity of schooling investments to "hold up," the model is estimated using Current Population Survey data. We focus on the impact of bargaining power on schooling investment, and find that the effects are large. A brief exploration of the two-sided investment model suggests that something akin to a "Hosios condition" result regarding the socially optimal surplus division rule may be attainable.
|Date of creation:||2011|
|Date of revision:|
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