Firm-specific training

Leonardo Felli and Christopher Harris

LSE Research Online Documents on Economics from London School of Economics and Political Science, LSE Library

Abstract: This paper investigates the market provision of firm-specific training, and identifies the inefficiencies associated with it. Within a general stochastic learning-by-doing model, there is a potential inefficiency in the market provision of firm-specific training. In order to determine whether this inefficiency is in fact present, we analyze two special cases of the model: the accelerated productivity-enhancement model and the accelerated learning model. In both models, the inefficiency is indeed present. 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 accelerated 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 the accelerated learning model, training results in a proportionate increase in both productivity enhancement and employee evaluation, and training is underprovided by the market. In both cases, turnover is inefficiently low.

Keywords: specific human capital; training; learning-by-doing; turnover; productivity enhancement; employee evaluation (search for similar items in EconPapers)
JEL-codes: D61 D86 J20 J24 (search for similar items in EconPapers)
Date: 2018-05-01
New Economics Papers: this item is included in nep-bec and nep-hrm
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

Published in Journal of Economic Theory, 1, May, 2018, 175, pp. 585-623. ISSN: 0022-0531

Downloads: (external link)
http://eprints.lse.ac.uk/87222/ Open access version. (application/pdf)

Related works:
Journal Article: Firm-specific training (2018)
Working Paper: Firm-Specific Training (2018)
Working Paper: Firm-specific training (2006)
Working Paper: Firm-Specific Training (2005)
Working Paper: Firm-Specific Training (2004)
Working Paper: Firm-Specific Training (2004)
Working Paper: Firm-Specific Training (2004)
Working Paper: Firm-Specific Training (2004)
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