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Training and Unions

Author

Listed:
  • Booth, Alison L
  • Chatterji, Monojit

Abstract

The paper examines the optimal level of training investment when trained workers are mobile, wage contracts are time-consistent, and training comprises both specific and general skills. It is shown that, in the absence of a social planner, the firm has ex-post monopsonistic power that drives trained workers’ wages below the socially-optimal level. The emergence of trade union bargaining at the firm level can increase social welfare, however, by counterbalancing the firm’s ex-post monopsonistic power in wage determination. Local union-firm wage bargaining ensures that the post-training wage is set sufficiently high to deter at least some quits, so that the number of workers the firm trains is nearer the socially-optimal number. The paper therefore sheds some light on the stylized facts that unions are associated with fewer quits and more firm-provided training.

Suggested Citation

  • Booth, Alison L & Chatterji, Monojit, 1997. "Training and Unions," CEPR Discussion Papers 1573, C.E.P.R. Discussion Papers.
  • Handle: RePEc:cpr:ceprdp:1573
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    Citations

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    Cited by:

    1. Malcomson, James M. & Maw, James W. & McCormick, Barry, 2000. "General training by firms, apprentice contracts, and public policy," Discussion Paper Series In Economics And Econometrics 0021, Economics Division, School of Social Sciences, University of Southampton.
    2. 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.
    3. Verner, Dorte, 1999. "Are wages and productivity in Zimbabwe affected by human capital investment and international trade?," Policy Research Working Paper Series 2101, The World Bank.
    4. Verner, Dorte, 1999. "Wage and productivity gaps - evidence from Ghana," Policy Research Working Paper Series 2168, The World Bank.

    More about this item

    Keywords

    Efficiency; Monopsony; Quits; Trade Unions; Training; Wages;

    JEL classification:

    • J20 - Labor and Demographic Economics - - Demand and Supply of Labor - - - General
    • J21 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Labor Force and Employment, Size, and Structure
    • J23 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Labor Demand
    • J24 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Human Capital; Skills; Occupational Choice; Labor Productivity
    • J41 - Labor and Demographic Economics - - Particular Labor Markets - - - Labor Contracts

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