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Labor Market Search and Schooling Investment

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  • Christopher Flinn

Abstract

We generalize the standard search, matching, and bargaining framework to allow individuals to acquire productivity-enhancing schooling prior to labor market entry. As is well-known, search frictions and weakness in bargaining position contribute to under-investment from an efficiency perspective. In order to evaluate the sensitivity of schooling investments to "hold up," the model is estimated using Current Population Survey data. We focus on the impact of bargaining power on schooling investment, and find that the effects are large. A brief exploration of the two-sided investment model suggests that something akin to a "Hosios condition" result regarding the socially optimal surplus division rule may be attainable.

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  • Christopher Flinn, 2011. "Labor Market Search and Schooling Investment," Carlo Alberto Notebooks 212, Collegio Carlo Alberto.
    • Handle: RePEc:cca:wpaper:212
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    References listed on IDEAS

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    Cited by:

    1. Alessandra Bonfiglioli & Gino Gancia, 2019. "Heterogeneity, selection and labor market disparities," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 31, pages 305-325, January.
    2. Esther Mirjam Girsberger & Miriam Rinawi & Matthias Krapf, 2018. "Wages and Employment: The Role of Occupational Skills," CESifo Working Paper Series 7114, CESifo.
    3. Gicheva, Dora, 2012. "Worker mobility, employer-provided general training, and the choice of graduate education," Labour Economics, Elsevier, vol. 19(2), pages 232-240.
    4. Daniela Del Boca & Christopher Flinn & Ewout Verriest & Matthew Wiswall, 2018. "Actors in the Child Development Process," Carlo Alberto Notebooks 575, Collegio Carlo Alberto.
    5. Fiaschi, Davide & Tealdi, Cristina, 2020. "Winners and Losers of Immigration," IZA Discussion Papers 13600, Institute of Labor Economics (IZA).
    6. Matteo Bobba & Luca Flabbi & Santiago Levy, 2022. "Labor Market Search, Informality, And Schooling Investments," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 63(1), pages 211-259, February.
    7. Stephanie de Mel, 2020. "A Job Worth Waiting for: Parental Wealth and Youth Unemployment in Ghana," IFS Working Papers W20/21, Institute for Fiscal Studies.
    8. Roberto Bonilla & Francis Kiraly, 2024. "Male investment in schooling with frictional labour and marriage markets," Review of Economics of the Household, Springer, vol. 22(2), pages 359-385, June.
    9. Christine Braun, 2019. "Crime and the minimum wage," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 32, pages 122-152, April.
    10. Jackson, Paul, 2023. "Equilibrium underemployment," Labour Economics, Elsevier, vol. 81(C).
    11. Liu, Qianshuo & Macho-Stadler, Inés, 2023. "Education choices and job market characteristics," Economics Letters, Elsevier, vol. 223(C).
    12. Darong Dai & Guoqiang Tian, 2020. "On the Efficiency of Wage-Setting Mechanisms with Search Frictions and Human Capital Investment," Annals of Economics and Finance, Society for AEF, vol. 21(1), pages 1-40, May.
    13. Daniela Del Boca & Christopher Flinn & Ewout Verriest & Matthew Wiswall, 2018. "Actors in the Child Development Process," Carlo Alberto Notebooks 575, Collegio Carlo Alberto.
    14. Cervantes, Carla Varona & Cooper, Russell, 2022. "Labor market implications of education mismatch," European Economic Review, Elsevier, vol. 148(C).
    15. Jung, Yeonha, 2023. "Formation of the legacy of slavery: Evidence from the US South," European Economic Review, Elsevier, vol. 154(C).
    16. Yujing Xu, 2022. "Unobservable investments, trade efficiency and search frictions," Canadian Journal of Economics/Revue canadienne d'économique, John Wiley & Sons, vol. 55(2), pages 764-799, May.
    17. Girsberger, Esther Mirjam & Koomen, Miriam & Krapf, Matthias, 2022. "Interpersonal, cognitive, and manual skills: How do they shape employment and wages?," Labour Economics, Elsevier, vol. 78(C).
    18. Girsberger, Esther Mirjam & Meango, Romuald, 2022. "The Puzzle of Educated Unemployment in West Africa," IZA Discussion Papers 15721, Institute of Labor Economics (IZA).
    19. repec:ags:aaea22:335436 is not listed on IDEAS
    20. Maqbool H. Sial & Ghulam Sarwar & Mubashra Saeed, 2019. "Surplus Education and Earnings Differentials in Pakistan: A Quantile Regression Analysis," Lahore Journal of Economics, Department of Economics, The Lahore School of Economics, vol. 24(2), pages 93-114, July-Dec.

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    More about this item

    Keywords

    Labor market search; schooling choice; hold-up; Nash bargaining;
    All these keywords.

    JEL classification:

    • J24 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Human Capital; Skills; Occupational Choice; Labor Productivity
    • J3 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs
    • J64 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Unemployment: Models, Duration, Incidence, and Job Search

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