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Matching, Screening and Firm Investment in General Training: Theory and Evidence

  • Clark, Damon


    (Nuffield College, Oxford)

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    When job matching is important, we show that firms will pay for general training under very weak conditions. The key ingredient in our model is the idea that it is more costly to screen skilled workers than it is to screen unskilled ones. In equilibrium, this 'softens' competition for trained workers, allowing firms to recoup training investments. We apply our model to a classic case of firm investment in general training - German Apprenticeship Training - and show that a key prediction of our model that is not shared by other models is strongly supported in the data.

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    Paper provided by International Conferences on Panel Data in its series 10th International Conference on Panel Data, Berlin, July 5-6, 2002 with number A2-4.

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    Date of creation: Apr 2002
    Date of revision:
    Handle: RePEc:cpd:pd2002:a2-4
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    1. Chang, Chun & Wang, Yijiang, 1996. "Human Capital Investment under Asymmetric Information: The Pigovian Conjecture Revisited," Journal of Labor Economics, University of Chicago Press, vol. 14(3), pages 505-19, July.
    2. David H. Autor, 2001. "Why Do Temporary Help Firms Provide Free General Skills Training?," The Quarterly Journal of Economics, MIT Press, vol. 116(4), pages 1409-1448, November.
    3. Gary S. Becker, 1962. "Investment in Human Capital: A Theoretical Analysis," Journal of Political Economy, University of Chicago Press, vol. 70, pages 9.
    4. Milgrom, Paul & Roberts, John, 1982. "Limit Pricing and Entry under Incomplete Information: An Equilibrium Analysis," Econometrica, Econometric Society, vol. 50(2), pages 443-59, March.
    5. Wagner, Karin, 1998. "The German apprenticeship system after unification," Discussion Papers, Research Unit: Economic Change and Employment FS I 98-301, Social Science Research Center Berlin (WZB).
    6. Euwals, Rob & Winkelmann, Rainer, 2001. "Why Do Firms Train? Empirical Evidence on the First Labour Market Outcomes of Graduated Apprentices," IZA Discussion Papers 319, Institute for the Study of Labor (IZA).
    7. Dietmar Harhoff & Thomas J. Kane, 1993. "Financing Apprenticeship Training: Evidence from Germany," NBER Working Papers 4557, National Bureau of Economic Research, Inc.
    8. Acemoglu, D. & Pischki, J.S., 1996. "Why Do Firms Train? Theory and Evidence," Working papers 96-7, Massachusetts Institute of Technology (MIT), Department of Economics.
    9. McAfee, R. Preston & McMillan, John, 1987. "Auctions with entry," Economics Letters, Elsevier, vol. 23(4), pages 343-347.
    10. Scoones, David, 2000. "Matching and competition for human capital," Labour Economics, Elsevier, vol. 7(2), pages 135-152, March.
    11. Topel, Robert H & Ward, Michael P, 1992. "Job Mobility and the Careers of Young Men," The Quarterly Journal of Economics, MIT Press, vol. 107(2), pages 439-79, May.
    12. Steven A. Matthews, 1995. "A Technical Primer on Auction Theory I: Independent Private Values," Discussion Papers 1096, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
    13. David Soskice, 1994. "Reconciling Markets and Institutions: The German Apprenticeship System," NBER Chapters, in: Training and the Private Sector: International Comparisons, pages 25-60 National Bureau of Economic Research, Inc.
    14. A. Werwatz, 1996. "How firm-specific is German apprenticeship training?," SFB 373 Discussion Papers 1996,12, Humboldt University of Berlin, Interdisciplinary Research Project 373: Quantification and Simulation of Economic Processes.
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