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Firm-Specific Training


  • Christopher Harris
  • Leonardo Felli


This paper introduces two complementary models of firm-specific training: an informational model and a productivity-enhancement model. In both models, market provision of firm-specific training is inefficient. However, the nature of the inefficiency depends on the balance between the two key components of training, namely productivity enhancement and employee evaluation. In the informational model, training results in a proportionate increase in productivity enhancement and employee valuation, and training is underprovided by the market. In the productivity-enhancement model, training results in an increase in productivity enhancement but no change in employee evaluation, and training is overprovided by the market. In both models, turnover is inefficiently low

Suggested Citation

  • Christopher Harris & Leonardo Felli, 2004. "Firm-Specific Training," 2004 Meeting Papers 62, Society for Economic Dynamics.
  • Handle: RePEc:red:sed004:62

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    References listed on IDEAS

    1. Christopher A. Pissarides, 1994. "Search Unemployment with On-the-job Search," Review of Economic Studies, Oxford University Press, vol. 61(3), pages 457-475.
    2. Bergemann, Dirk & Valimaki, Juuso, 1996. "Learning and Strategic Pricing," Econometrica, Econometric Society, vol. 64(5), pages 1125-1149, September.
    3. Felli, Leonardo & Harris, Christopher, 1996. "Learning, Wage Dynamics, and Firm-Specific Human Capital," Journal of Political Economy, University of Chicago Press, vol. 104(4), pages 838-868, August.
    4. Fabien Postel-Vinay & Jean-Marc Robin, 2002. "Equilibrium Wage Dispersion with Worker and Employer Heterogeneity," Econometrica, Econometric Society, vol. 70(6), pages 2295-2350, November.
    5. Jovanovic, Boyan, 1979. "Job Matching and the Theory of Turnover," Journal of Political Economy, University of Chicago Press, vol. 87(5), pages 972-990, October.
    6. Stevens, Margaret, 1994. "A Theoretical Model of On-the-Job Training with Imperfect Competition," Oxford Economic Papers, Oxford University Press, vol. 46(4), pages 537-562, October.
    7. Patrick Bolton & Christopher Harris, 1999. "Strategic Experimentation," Econometrica, Econometric Society, vol. 67(2), pages 349-374, March.
    8. James Heckman, 1993. "Assessing Clinton's Program on Job Training, Workfare, and Education in the Workplace," NBER Working Papers 4428, National Bureau of Economic Research, Inc.
    9. Robert H. Topel & Michael P. Ward, 1992. "Job Mobility and the Careers of Young Men," The Quarterly Journal of Economics, Oxford University Press, vol. 107(2), pages 439-479.
    10. Canice Prendergast, 1993. "The Role of Promotion in Inducing Specific Human Capital Acquisition," The Quarterly Journal of Economics, Oxford University Press, vol. 108(2), pages 523-534.
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    Cited by:

    1. Gueorgui Kambourov & Iourii Manovskii, 2001. "Rising Occupational and Industry Mobility in the United States:1968-1993," PIER Working Paper Archive 04-012, Penn Institute for Economic Research, Department of Economics, University of Pennsylvania, revised 05 Jul 2004.
    2. 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.

    More about this item


    Learning; Firm-Specific Human Capital; Training;

    JEL classification:

    • J24 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Human Capital; Skills; Occupational Choice; Labor Productivity
    • D43 - Microeconomics - - Market Structure, Pricing, and Design - - - Oligopoly and Other Forms of Market Imperfection
    • J63 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Turnover; Vacancies; Layoffs


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