 General training in labor markets: Common value auctions with unobservable investmentNeel Rao Journal of Economic Behavior & Organization, 2015, vol. 120, issue C, 19-45 Abstract: This paper studies the puzzle of employer financing for the general training of workers. A parsimonious theory is developed based on asymmetric information between employers about the quantity of training. The labor market is modeled as a common value auction with an informed and an uninformed bidder. The novel feature of the game is that one of the bidders can make an unobservable investment that increases the value of the item before the auction. By randomizing the amount of training provided, an employer can create an endogenous adverse selection problem, enabling it to compress the wage structure and capture some returns from its training investment. The model generates continuous equilibrium wage and training distributions, and identical employees can receive different wage offers and training levels. A parametric example is used to illustrate how the shape of the wage distribution depends on the elasticity of production with respect to human capital. JEL-codes: D44 D82 J24 J31 (search for similar items in EconPapers) Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:eee:jeborg:v:120:y:2015:i:c:p:19-45 DOI: 10.1016/j.jebo.2015.07.013 Access Statistics for this article Journal of Economic Behavior & Organization is currently edited by Houser, D. and Puzzello, D. More articles in Journal of Economic Behavior & Organization from Elsevier |
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