IDEAS home Printed from https://ideas.repec.org/p/usg/dp2005/2005-21.html
   My bibliography  Save this paper

Firm Training and Public Policy

Author

Listed:
  • Wolfgang Lechthaler

    ()

Abstract

In this paper I analyze firm training in the dynamic context of a Blanchard-model with infinite periods. Firms provide their workers with training due to wage compression caused by frictions in the labor market. I do not only describe the stationary solution but as well the transition to long-run equilibrium. It turns out that after a positive shock to the stock of physical capital, training investments overshoot and then slowly converge to the new equilibrium level. Furthermore, I discuss some aspects of public policy like a tax on capital income and a subsidy for firm training or the combination of both policies. It turns out that a capital tax influences training investments via two opposing effects. On the one hand, it lowers the stock of physical capital and thereby the productivity of training. On the other hand, the bargaining power of workers is diminished because there are fewer firms active in the market. This leads to a higher degree of wage-compression improving the incentives to train. Principally, both effects can dominate. However, for empirically justified values for the elasticity of substitution between capital and labor, the productivity effect is more likely to prevail, implying that a tax on physical capital discourages firm training too. Since underinvestment in training is more severe than underinvestment in physical capital, it is possible that a tax on capital income increases welfare.

Suggested Citation

  • Wolfgang Lechthaler, 2005. "Firm Training and Public Policy," University of St. Gallen Department of Economics working paper series 2005 2005-21, Department of Economics, University of St. Gallen.
  • Handle: RePEc:usg:dp2005:2005-21
    as

    Download full text from publisher

    File URL: http://ux-tauri.unisg.ch/RePEc/usg/dp2005/DP-21_LT.pdf
    Download Restriction: no

    More about this item

    JEL classification:

    • E24 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Employment; Unemployment; Wages; Intergenerational Income Distribution; Aggregate Human Capital; Aggregate Labor Productivity
    • J24 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Human Capital; Skills; Occupational Choice; Labor Productivity
    • M53 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Personnel Economics - - - Training

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:usg:dp2005:2005-21. 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: (Joerg Baumberger). General contact details of provider: http://edirc.repec.org/data/vwasgch.html .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.