A Model of General Training, Banking, and Labor Turnover

Mak Arvin

Bulletin of Economic Research, 1993, vol. 45, issue 3, 197-214

Abstract: Conventionally, models of general training assume perfect capital markets; as a result, workers smooth their consumption stream through borrowing. In these models general training has no effect on labor turnover. I develop a model of general training where workers have diminishing marginal utility from consumption, capital markets are imperfect, and a firm cannot monitor the match quality with another firm of a worker who quits. It is shown that in the absence of a surplus effect from training, raising the level of general training steepens the worker's wage profile for reasons associated with consumption smoothing and labor turnover. However, with the surplus effect, results may be ambiguous. Copyright 1993 by Blackwell Publishing Ltd and the Board of Trustees of the Bulletin of Economic Research

Date: 1993
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