Relational Knowledge Transfers

Luis Garicano and Luis Rayo

American Economic Review, 2017, vol. 107, issue 9, 2695-2730

Abstract: We study how relational contracts mitigate Becker's classic problem of providing general human capital when training contracts are incomplete. The firm's profit-maximizing agreement is a multiperiod apprenticeship in which the novice is trained gradually over time and eventually receives all knowledge. The firm adopts a 1/e rule, whereby at the beginning of the relationship the novice is trained, for free, just enough to produce a fraction 1/e of the efficient output. After that, the novice earns all additional knowledge with labor. This rule causes inefficiently lengthy relationships that grow longer the more patient the players. A minimum wage is welfare enhancing.

JEL-codes: D82 D86 J24 M53 (search for similar items in EconPapers)
Date: 2017
Note: DOI: 10.1257/aer.20160194
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Citations: View citations in EconPapers (14)

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Related works:
Working Paper: Relational knowledge transfers (2017)
Working Paper: Relational knowledge transfers (2016)
Working Paper: Relational Knowledge Transfers (2016)
Working Paper: Relational knowledge transfers (2016)
Working Paper: Relational Knowledge Transfers (2013)
Working Paper: Relational Knowledge Transfers (2013)
Working Paper: Relational knowledge transfers (2013)
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