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Wage Differentiation via Subsidised General Training

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  • Steinar Holden
  • V. Bhaskar

Abstract

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.

Suggested Citation

  • Steinar Holden & V. Bhaskar, 2003. "Wage Differentiation via Subsidised General Training," CESifo Working Paper Series 848, CESifo.
    • Handle: RePEc:ces:ceswps:_848
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    References listed on IDEAS

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    Cited by:

    1. Giorgio Brunello & Maria De Paola, 2004. "Market Failures and the Under-Provision of Training," CESifo Working Paper Series 1286, CESifo.

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    More about this item

    JEL classification:

    • D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design
    • J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials

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