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Is Wage Compression a Necessary Condition for Firm-Financed General Training?


  • Booth, Alison L
  • Zoega, Gylfi


It is well known that workers in Europe appear to receive more firm-provided general training than their counterparts in the United States. Moreover, there is considerable evidence that firms, in many cases, pay for the general training, contrary to the predictions of Becker (1964). In important recent contributions, Acemoglu and Pischke argue that it is through wage compression that unions and other labour-market institutions induce firms to invest in general training. We show that while wage compression can make firms more willing to pay for training, it does not constitute a necessary condition for firm-sponsored training.

Suggested Citation

  • Booth, Alison L & Zoega, Gylfi, 2001. "Is Wage Compression a Necessary Condition for Firm-Financed General Training?," CEPR Discussion Papers 2845, C.E.P.R. Discussion Papers.
  • Handle: RePEc:cpr:ceprdp:2845

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    References listed on IDEAS

    1. Acemoglu, Daron & Pischke, Jorn-Steffen, 1999. "Beyond Becker: Training in Imperfect Labour Markets," Economic Journal, Royal Economic Society, vol. 109(453), pages 112-142, February.
    2. repec:eme:rlepps:v:18:y:1999:i:1999:p:303-330 is not listed on IDEAS
    3. 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.
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    Cited by:

    1. Chen, Yu-Fu & Zoega, Gylfi, 2010. "Life-Cycle, Effort and Academic Deadwood," SIRE Discussion Papers 2010-28, Scottish Institute for Research in Economics (SIRE).
    2. Barry T. Hirsch & Bruce E. Kaufman & Tetyana Zelenska, 2015. "Minimum Wage Channels of Adjustment," Industrial Relations: A Journal of Economy and Society, Wiley Blackwell, vol. 54(2), pages 199-239, April.
    3. Hinz, Tina & Mohrenweiser, Jens, 2017. "The Effect of Regional Competition and Company-sponsored Training on the Productivity-Wage Wedge," Annual Conference 2017 (Vienna): Alternative Structures for Money and Banking 168292, Verein für Socialpolitik / German Economic Association.
    4. Zoega, Gylfi & Karlsson, Thorlakur, 2006. "Does wage compression explain rigid money wages?," Economics Letters, Elsevier, vol. 93(1), pages 111-115, October.
    5. Gerfin, Michael, 2004. "Firm-Sponsored General Training in Frictional Labour Markets: An Empirical Analysis for Switzerland," IZA Discussion Papers 1077, Institute for the Study of Labor (IZA).
    6. Alison Booth & Mark L. Bryan, 2006. "Training, Minimum Wages and the Earnings Distribution," CEPR Discussion Papers 537, Centre for Economic Policy Research, Research School of Economics, Australian National University.
    7. Cardoso, Ana Rute, 2009. "Long-Term Impact of Youth Minimum Wages: Evidence from Two Decades of Individual Longitudinal Data," IZA Discussion Papers 4236, Institute for the Study of Labor (IZA).
    8. Asplund, Rita, 2004. "The Provision and Effects of Company Training. A brief review of the literature," Discussion Papers 907, The Research Institute of the Finnish Economy.
    9. Garloff Alfred & Kuckulenz Anja, 2006. "Training, Mobility, and Wages: Specific Versus General Human Capital," Journal of Economics and Statistics (Jahrbuecher fuer Nationaloekonomie und Statistik), De Gruyter, vol. 226(1), pages 55-81, February.
    10. Alison L. Booth & Pamela Katic, 2011. "Men at Work in a Land Down‐Under: Testing Some Predictions of Human Capital Theory," British Journal of Industrial Relations, London School of Economics, vol. 49(1), pages 1-24, March.
    11. Michael Gerfin, 2003. "Firm-sponsored Work-Related Training in Frictional Labour Markets: An empirical analysis for Switzerland," Diskussionsschriften dp0317, Universitaet Bern, Departement Volkswirtschaft.
    12. Filipe Almeida-Santos & Karen Mumford, 2005. "Employee Training And Wage Compression In Britain," Manchester School, University of Manchester, vol. 73(3), pages 321-342, June.
    13. Derek C. Jones & Panu Kalmi & Antti Kauhanen, 2012. "The effects of general and firm-specific training on wages and performance: evidence from banking," Oxford Economic Papers, Oxford University Press, vol. 64(1), pages 151-175, January.
    14. Nikutowski, Oliver, 2007. "Accelerated Technological Progress - An Explanation for Wage Dispersion and a Possible Solution to the Productivity Paradox," Discussion Papers in Economics 1925, University of Munich, Department of Economics.
    15. Bassanini, Andrea & Booth, Alison L. & Brunello, Giorgio & De Paola, Maria & Leuven, Edwin, 2005. "Workplace Training in Europe," IZA Discussion Papers 1640, Institute for the Study of Labor (IZA).
    16. Michael Gerfin, 2003. "Work-Related Training and Wages: An empirical analysis for male workers in Switzerland," Diskussionsschriften dp0316, Universitaet Bern, Departement Volkswirtschaft.
    17. Booth, Alison L., 2014. "Wage determination and imperfect competition," Labour Economics, Elsevier, vol. 30(C), pages 53-58.
    18. Mason, Geoff & O'Leary, Brigid & Vecchi, Michela, 2012. "Certified and uncertified skills and productivity growth performance: Cross-country evidence at industry level," Labour Economics, Elsevier, vol. 19(3), pages 351-360.
    19. Harley Frazis & Mark A Loewenstein, 2006. "Wage Compression and the Division of Returns to Productivity Growth: Evidence from EOPP," Working Papers 398, U.S. Bureau of Labor Statistics.
    20. Simone Tuor & Uschi Backes-Gellner, 2009. "Time - Even More Costly Than Money: Training Costs of Workers and Firms," Economics of Education Working Paper Series 0046, University of Zurich, Department of Business Administration (IBW).
    21. Bassanini, Andrea & Brunello, Giorgio, 2008. "Is training more frequent when the wage premium is smaller? Evidence from the European Community Household Panel," Labour Economics, Elsevier, vol. 15(2), pages 272-290, April.
    22. Bilanakos, Christos, 2013. "Career concerns and firm – sponsored general training," Research in Economics, Elsevier, vol. 67(2), pages 117-132.
    23. Jens Mohrenweiser & Gabriele Wydra-Somaggio & Thomas Zwick, 2017. "Information Advantages of Training Employers Despite Credible Training Certificates," Economics of Education Working Paper Series 0121, University of Zurich, Department of Business Administration (IBW), revised Apr 2017.
    24. Thomas Zwick, 2007. "Apprenticeship Training in Germany? Investment or Productivity Driven?," ZEW Discussion Papers 07-023, ZEW - Zentrum für Europäische Wirtschaftsforschung / Center for European Economic Research.
    25. Rita Asplund, 2005. "The Provision and Effects of Company Training: A Brief Review of the Literature," Nordic Journal of Political Economy, Nordic Journal of Political Economy, vol. 31, pages 47-73.

    More about this item


    absolute- and relative wage compression; Firm-financed general training;

    JEL classification:

    • J24 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Human Capital; Skills; Occupational Choice; Labor Productivity
    • J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials


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