Why do Firms Train? Theory and Evidence

Daron Acemoglu and Jorn-Steffen Pischke

No 1460, CEPR Discussion Papers from Centre for Economic Policy Research

Abstract: This paper offers and tests a theory of training whereby workers do not pay for general training they receive. The crucial ingredient in our model is that the current employer has superior information about the worker’s ability relative to other firms. This informational advantage gives the employer an ex-post monopsony power over the worker which encourages the firm to provide training. We show that the model can lead to multiple equilibria. In one equilibrium quits are endogenously high and as a result employers have limited monopsony power and are willing to supply only little training, while in another equilibrium quits are low and training high. We also derive predictions from our model not shared by other explanations of firm-sponsored training. Using microdata from Germany, we show that the predictions of the specific human capital model are rejected, while our model receives support from the data.

Keywords: Asymmetric Information; General Human Capital; German Apprenticeship System; Monopsony; Training (search for similar items in EconPapers)
JEL-codes: D82 J24 (search for similar items in EconPapers)
Date: 1996-09
References: Add references at CitEc
Citations: View citations in EconPapers (62)

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Related works:
Journal Article: Why Do Firms Train? Theory and Evidence (1998)
Working Paper: Why Do Firms Train? Theory and Evidence (1996)
Working Paper: Why Do Firms Train? Theory and Evidence (1996)
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