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Labor Market Search and Schooling Investment


  • Christopher Flinn


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.

Suggested Citation

  • Christopher Flinn, 2011. "Labor Market Search and Schooling Investment," Carlo Alberto Notebooks 212, Collegio Carlo Alberto.
  • Handle: RePEc:cca:wpaper:212

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    Cited by:

    1. Bobba, Matteo & Flabbi, Luca & Levy Algazi, Santiago, 2017. "Labor Market Search, Informality and Schooling Investments," IZA Discussion Papers 11170, Institute for the Study of Labor (IZA).
    2. Gicheva, Dora, 2012. "Worker mobility, employer-provided general training, and the choice of graduate education," Labour Economics, Elsevier, vol. 19(2), pages 232-240.
    3. Goel, Manisha, 2017. "Inequality Between and Within Skill Groups: The Curious Case of India," World Development, Elsevier, vol. 93(C), pages 153-176.
    4. repec:eee:labeco:v:48:y:2017:i:c:p:183-197 is not listed on IDEAS

    More about this item


    Labor market search; schooling choice; hold-up; Nash bargaining;

    JEL classification:

    • J24 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Human Capital; Skills; Occupational Choice; Labor Productivity
    • J3 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs
    • J64 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Unemployment: Models, Duration, Incidence, and Job Search

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