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Efficiency wages, labor heterogeneity and the fInancing of the training cost

Xavier Wauthy and Yves Zenou ()

No 1997072, CORE Discussion Papers from Université catholique de Louvain, Center for Operations Research and Econometrics (CORE)

Abstract: We consider a dual labor market with a continuum of heterogeneous workers differentiated by their ability of acquiring a specific skill. In the primary sector, jobs require firm-specific training and firms set efficiency wages. In the secondary sector, wages are competitive and no training is required. Given workers’ heterogeneity, firms in the primary sector face an elastic labor supply, so that they can be labor constrained at the efficiency wage. When this is the case, we show that firms may optimally choose to bear all the training cost in order to relax the labor supply constraint.

Keywords: dual labor markets; efficiency wages; training costs; workers’ heterogeneity; labor supply constraint (search for similar items in EconPapers)
JEL-codes: J31 J41 (search for similar items in EconPapers)
Date: 1997-10-01
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