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Efficiency wages, labor heterogeneity and the fInancing of the training cost

Author

Listed:
  • WAUTHY, Xavier

    (Fond National de la Recherche Scientifique. IRES, Université catholique de Louvain, Louvain-la-Neuve, Belgium)

  • ZENOU, Yves

    (ERMES, Uniserité Panthéon-Assas and Center for Operations Research and Econometrics (CORE), Université catholique de Louvain (UCL))

Abstract

We consider a dual labor market with a continuum of heterogeneous workers differentiated by their ability of acquiring a specific skill. In the primary sector, jobs require firm-specific training and firms set efficiency wages. In the secondary sector, wages are competitive and no training is required. Given workers’ heterogeneity, firms in the primary sector face an elastic labor supply, so that they can be labor constrained at the efficiency wage. When this is the case, we show that firms may optimally choose to bear all the training cost in order to relax the labor supply constraint.

Suggested Citation

  • WAUTHY, Xavier & ZENOU, Yves, 1997. "Efficiency wages, labor heterogeneity and the fInancing of the training cost," LIDAM Discussion Papers CORE 1997072, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
    • Handle: RePEc:cor:louvco:1997072
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    JEL classification:

    • J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials
    • J41 - Labor and Demographic Economics - - Particular Labor Markets - - - Labor Contracts

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