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General training by firms, apprentice contracts, and public policy

  • Malcomson, James M.
  • Maw, James W.
  • McCormick, Barry

Workers will not pay for general on-the-job training if contracts are not enforceable. Firms may if there are mobility frictions. Private information about worker productivities, however, prevents workers who quit receiving their marginal products elsewhere. Their new employers then receive external benefits from their training. Training firms increase profits by offering apprenticeships committing them to high wages for trainees retained on completion. At those wages, only good workers are retained, which signals their productivity and reduces the external benefits if they subsequently quit. Regulation of apprenticeship length (a historically important feature) can enhance efficiency, as can appropriate subsidies.

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Paper provided by Economics Division, School of Social Sciences, University of Southampton in its series Discussion Paper Series In Economics And Econometrics with number 0021.

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Date of creation: 01 Jan 2000
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Handle: RePEc:stn:sotoec:0021
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