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Training, Rent-Sharing and Unions

  • Booth, Alison L
  • Francesconi, Marco
  • Zoega, Gylfi

We investigate two dimensions of investment in general human capital on-the-job: the number of workers trained and the intensity of training for each worker. In the benchmark case, we consider wage and training decisions made by firms in an imperfectly competitive labour market. The benchmark case generates two types of market failure: too few workers are trained, and the workers who are hired receive too little training. This is caused by the firms' discount rate exceeding the social discount rate, due to a 'quitting externality'. We show that the presence of labour unions can increase social welfare by increasing training intensity, while reducing welfare by lowering the number of workers trained. Using the British Household Panel Survey, we confirm the predictions of the model.

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Paper provided by C.E.P.R. Discussion Papers in its series CEPR Discussion Papers with number 2200.

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Date of creation: Aug 1999
Date of revision:
Handle: RePEc:cpr:ceprdp:2200
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  1. Lee, Lung-fei & Maddala, G S & Trost, R P, 1980. "Asymptotic Covariance Matrices of Two-Stage Probit and Two-Stage Tobit Methods for Simultaneous Equations Models with Selectivity," Econometrica, Econometric Society, vol. 48(2), pages 491-503, March.
  2. Daron Acemoglu & Jörn-Steffen Pischke, 1998. "Why Do Firms Train? Theory And Evidence," The Quarterly Journal of Economics, MIT Press, vol. 113(1), pages 78-118, February.
  3. 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.
  4. Chiu, Y Stephen, 1998. "Noncooperative Bargaining, Hostages, and Optimal Asset Ownership," American Economic Review, American Economic Association, vol. 88(4), pages 882-901, September.
  5. Booth, Alison L & Chatterji, Monojit, 1998. "Unions and Efficient Training," Economic Journal, Royal Economic Society, vol. 108(447), pages 328-43, March.
  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.
  7. Booth, Alison L & Zoega, Gylfi, 1999. "Do Quits Cause Under-Training?," Oxford Economic Papers, Oxford University Press, vol. 51(2), pages 374-86, April.
  8. Ippolito, Roberto & Miller, Marcus & Zhang, Lei, 1997. "Shareholders and Stakeholders: Human Capital and Industry Equilibrium," CEPR Discussion Papers 1719, C.E.P.R. Discussion Papers.
  9. Booth, Alison L, 1991. "Job-Related Formal Training: Who Receives It and What Is It Worth?," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 53(3), pages 281-94, August.
  10. Klemperer, Paul, 1995. "Competition When Consumers Have Switching Costs: An Overview with Applications to Industrial Organization, Macroeconomics, and International Trade," Review of Economic Studies, Wiley Blackwell, vol. 62(4), pages 515-39, October.
  11. Stevens, Margaret, 1994. "A Theoretical Model of On-the-Job Training with Imperfect Competition," Oxford Economic Papers, Oxford University Press, vol. 46(4), pages 537-62, October.
  12. David De Meza & Ben Lockwood, 1998. "Does Asset Ownership Always Motivate Managers? Outside Options And The Property Rights Theory Of The Firm," The Quarterly Journal of Economics, MIT Press, vol. 113(2), pages 361-386, May.
  13. 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.
  14. Lynch, Lisa M, 1992. "Private-Sector Training and the Earnings of Young Workers," American Economic Review, American Economic Association, vol. 82(1), pages 299-312, March.
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