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Market Conditions and Worker Training: How Does it Affect and Whom?

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  • Sumon Majumdar

    () (Queen's University)

Abstract

This paper analyses the impact of labor market conditions on a firm's incentive to train its workers. In an equilibrium model of the labor market in which firms use both untrained and in-house trained workers, we show that the incidence of training increases with the tightness of the labor market. In a multi-sector framework, the usual threat of hold-up by a trained worker is more severe for workers who change their sector of work; during downturns, this serves to bias firms' incentives in imparting training away from such workers and towards workers already in the firm and those new workers coming from the same sector. Evidence from the NLSY confirms both predictions --- the incidence and duration of company-sponsored training is adversely affected by higher unemployment rates; furthermore, this negative effect is much stronger for workers who change industries as compared to those who do not.

Suggested Citation

  • Sumon Majumdar, 2006. "Market Conditions and Worker Training: How Does it Affect and Whom?," Working Papers 1100, Queen's University, Department of Economics.
  • Handle: RePEc:qed:wpaper:1100
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    File URL: http://qed.econ.queensu.ca/working_papers/papers/qed_wp_1100.pdf
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    References listed on IDEAS

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    1. Bartel, Ann P & Sicherman, Nachum, 1998. "Technological Change and the Skill Acquisition of Young Workers," Journal of Labor Economics, University of Chicago Press, vol. 16(4), pages 718-755, October.
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    7. 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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    10. Barron, John M & Black, Dan A & Loewenstein, Mark A, 1987. "Employer Size: The Implications for Search, Training, Capital Investment, Starting Wages, and Wage Growth," Journal of Labor Economics, University of Chicago Press, vol. 5(1), pages 76-89, January.
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    Cited by:

    1. Bellmann Lutz & Gerner Hans-Dieter & Leber Ute, 2014. "Firm-Provided Training During the Great Recession," Journal of Economics and Statistics (Jahrbuecher fuer Nationaloekonomie und Statistik), De Gruyter, vol. 234(1), pages 5-22, February.
    2. Francisca Bremberger & Rudolf Hochholzer & Peter Huber, 2016. "Labour Turnover, Employment Density and Employer Provided Training: Evidence from Vienna," European Journal of Business Science and Technology, Mendel University in Brno, Faculty of Business and Economics, vol. 2(1), pages 5-22, November.
    3. Samuel Muehlemann & Juerg Schweri & Rainer Winkelmann & Stefan C. Wolter, 2007. "An Empirical Analysis of the Decision to Train Apprentices," LABOUR, CEIS, vol. 21(3), pages 419-441, September.
    4. Mühlemann, Samuel & Wolter, Stefan C. & Wüest, Adrian, 2009. "Apprenticeship Training and the Business Cycle," IZA Discussion Papers 4460, Institute for the Study of Labor (IZA).
    5. Muehlemann, Samuel & Pfeifer, Harald & Walden, Günter & Wenzelmann, Felix & Wolter, Stefan C., 2010. "The financing of apprenticeship training in the light of labor market regulations," Labour Economics, Elsevier, vol. 17(5), pages 799-809, October.
    6. Francisca Bauer & Rudolf Hochholzer & Peter Huber, 2010. "Labour Turnover, Labour Market Density and In-house Training. Preliminary Results of the Vienna Employment and Skilling Monitor," WIFO Working Papers 367, WIFO.
    7. Mikami, Satoru & Furukawa, Mitsuaki, 2014. "An Empirical Study of the Conditions for Successful Knowledge Transfer in Training Programs," Working Papers 85, JICA Research Institute.
    8. World Bank & National Research University – Higher School of Economics, 2013. "Developing Skills for Innovative Growth in the Russian Federation," World Bank Other Operational Studies 16100, The World Bank.
    9. Franziska Burkart & Harald Pfeifer & Uschi Backes-Gellner, 2017. "Firms as Producers vs. Consumers of Skills: An Optimal Inventory Strategy," Economics of Education Working Paper Series 0136, University of Zurich, Department of Business Administration (IBW).

    More about this item

    Keywords

    firm-sponsored training; labor market tightness; hold up; unemployment rate;

    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
    • J41 - Labor and Demographic Economics - - Particular Labor Markets - - - Labor Contracts

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