Optimal Contracts and Investment in General Human Capital under Common Agency
This paper studies contracts and incentives to invest in general human capital under common agency. Both the worker and the employer have too weak investment incentives in equilibrium. The employer’s underinvestment results from his failure to internalize the positive impact of his investment on other firms’ productivity as well as from the fact that he gives a share of output to the worker in order to induce a higher effort contribution. The worker anticipates that she will not be the full residual claimant of benefits and underinvests in equilibrium, too. A benevolent government will choose a set of subsidies such that the worker’s investment relative to the employer is equal to the first-best relative investment intensity. If the number of employers is small, then the worker’s investment level is relatively low and the government must give a relatively higher subsidy to the worker in order to stimulate her investment incentives.
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Filipe Almeida-Santos & Karen Mumford, 2005.
"Employee Training And Wage Compression In Britain,"
University of Manchester, vol. 73(3), pages 321-342, 06.
- Filipe Almeida-Santos & Karen Mumford, "undated". "Employee Training and Wage Compression in Britain," Discussion Papers 04/11, Department of Economics, University of York.
- Almeida-Santos, Filipe & Mumford, Karen A., 2004. "Employee Training and Wage Compression in Britain," IZA Discussion Papers 1197, Institute for the Study of Labor (IZA).
- Peters, Michael, 2001. "Common Agency and the Revelation Principle," Econometrica, Econometric Society, vol. 69(5), pages 1349-1372, September.
- Michael Peters, 1999. "Common Agency and the Revelation Principle," Working Papers peters-99-01, University of Toronto, Department of Economics.
- Martimort, David & Stole, Lars, 2009. "Selecting equilibria in common agency games," Journal of Economic Theory, Elsevier, vol. 144(2), pages 604-634, March.
- Edwin Leuven, 2005. "The Economics of Private Sector Training: A Survey of the Literature," Journal of Economic Surveys, Wiley Blackwell, vol. 19(1), pages 91-111, 02. Full references (including those not matched with items on IDEAS)
When requesting a correction, please mention this item's handle: RePEc:ucy:cypeua:08-2011. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: ()
If references are entirely missing, you can add them using this form.