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Wage Differentiation via Subsidised General Training

Listed author(s):
  • Steinar Holden
  • V. Bhaskar

We provide a new explanation for why firms pay for general training in a competitive labor market. If firms are unable to tailor individual wages to ability, for informational or institutional reasons, they will pay for general training in order to attract better quality workers. The market provision of training may well exceed the first best level. Our explanation relies on wage compression within skill categories, while imperfect competition based explanations for firm subsidised general training rely on wage compression across skill categories.

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File URL: http://www.cesifo-group.de/DocDL/cesifo_wp848.pdf
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Paper provided by CESifo Group Munich in its series CESifo Working Paper Series with number 848.

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Date of creation: 2003
Handle: RePEc:ces:ceswps:_848
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  1. 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.
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  3. George A. Akerlof & Janet L. Yellen, 1990. "The Fair Wage-Effort Hypothesis and Unemployment," The Quarterly Journal of Economics, Oxford University Press, vol. 105(2), pages 255-283.
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  5. Giorgio Brunello, 2002. "Is Training more Frequent when Wage Compression is Higher? Evidence from 11 European Countries," CESifo Working Paper Series 637, CESifo Group Munich.
  6. Daron Acemoglu & Jorn-Steffen Pischke, 1999. "The Structure of Wages and Investment in General Training," Journal of Political Economy, University of Chicago Press, vol. 107(3), pages 539-572, June.
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  8. Stephen French & Katsuyuki Kubo & David Marsden, 2001. "Does performance pay de-motivate, and does it matter?," LSE Research Online Documents on Economics 3637, London School of Economics and Political Science, LSE Library.
  9. Arulampalam, Wiji & Booth, Alison L. & Bryan, Mark L., 2002. "Work-Related Training and the New National Minimum Wage in Britain," IZA Discussion Papers 595, Institute for the Study of Labor (IZA).
  10. David H. Autor, 2001. "Why Do Temporary Help Firms Provide Free General Skills Training?," The Quarterly Journal of Economics, Oxford University Press, vol. 116(4), pages 1409-1448.
  11. Peter Cappelli, 2002. "Why Do Employers Pay For College?," NBER Working Papers 9225, National Bureau of Economic Research, Inc.
  12. Malcomson, James M. & Maw, James W. & McCormick, Barry, 2003. "General training by firms, apprentice contracts, and public policy," European Economic Review, Elsevier, vol. 47(2), pages 197-227, April.
  13. Blau, Francine D & Kahn, Lawrence M, 1996. "International Differences in Male Wage Inequality: Institutions versus Market Forces," Journal of Political Economy, University of Chicago Press, vol. 104(4), pages 791-836, August.
  14. Stevens, Margaret, 1994. "A Theoretical Model of On-the-Job Training with Imperfect Competition," Oxford Economic Papers, Oxford University Press, vol. 46(4), pages 537-562, October.
  15. Gregory, Robert G. & Borland, Jeff, 1999. "Recent developments in public sector labor markets," Handbook of Labor Economics,in: O. Ashenfelter & D. Card (ed.), Handbook of Labor Economics, edition 1, volume 3, chapter 53, pages 3573-3630 Elsevier.
  16. Katz, Eliakim & Ziderman, Adrian, 1990. "Shared investment in general training : the role of information," Policy Research Working Paper Series 535, The World Bank.
  17. Axel Ockenfels & Gary E. Bolton, 2000. "ERC: A Theory of Equity, Reciprocity, and Competition," American Economic Review, American Economic Association, vol. 90(1), pages 166-193, March.
  18. Malcomson, James M, 1984. "Work Incentives, Hierarchy, and Internal Labor Markets," Journal of Political Economy, University of Chicago Press, vol. 92(3), pages 486-507, June.
  19. Katz, Eliakim & Ziderman, Adrian, 1990. "Investment in General Training: The Role of Information and Labour Mobility," Economic Journal, Royal Economic Society, vol. 100(403), pages 1147-1158, December.
  20. Wiji Arulampalam & Alison L. Booth & Mark L. Bryan, 2004. "Training and the new minimum wage," Economic Journal, Royal Economic Society, vol. 114(494), pages 87-94, 03.
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