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The Effects of Globalization on Worker Training

  • Gersbach, Hans

    ()

    (ETH Zurich)

  • Schmutzler, Armin

    ()

    (University of Zurich)

We consider a three-stage game to examine how market integration affects firms’ incentives to provide general worker training. In stage 1, firms invest in productivity-enhancing training. In stage 2, they can make wage offers for each others’ workers. Finally, Cournot competition takes place. When two product markets become integrated, that is, replaced by a market with greater demand and more firms, training by each firm increases, provided the two markets are initially sufficiently concentrated. When barriers between less concentrated markets are eliminated, training is reduced. Integration increases welfare if it does not reduce training. However, for large parameter regions, welfare decreases if integration reduces training. We also show that opening product markets to countries with publicly funded training or cheap, low-skilled labor can threaten apprenticeship systems.

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Paper provided by Institute for the Study of Labor (IZA) in its series IZA Discussion Papers with number 2403.

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Length: 42 pages
Date of creation: Oct 2006
Date of revision:
Handle: RePEc:iza:izadps:dp2403
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