Training for Adverse Selection

Heski Bar-Isaac and Levy, Raphaël

No 20530, CEPR Discussion Papers from Centre for Economic Policy Research

Abstract: We study training provision in environments where employers privately observe employee performance and thus derive information rents. Training impacts not only overall productivity, but also the extent of adverse selection, and, thereby, the way surplus is shared: firms or workers may strategically over-invest in training to increase their share of the pie. Going beyond the traditional distinction between general and specific training, we highlight how various kinds of training generate different incentives: workers aim at curbing adverse selection and therefore invest in remedial training that primarily benefits the least able or guarantees minimal skills; conversely, firms focus on excellence-oriented programs that boost the productivity of the most able and promote organizational practices that increase match-specific productivity. More generally, the paper highlights how the design and composition of training programs—and their interaction with other HR practices—shape turnover, wages, and firm performance through the adverse-selection channel.

Keywords: Training; Adverse selection; General human capital; Firm-specific human capital (search for similar items in EconPapers)
JEL-codes: D82 J24 J31 M53 (search for similar items in EconPapers)
Date: 2025-08
References: Add references at CitEc
Citations:

Downloads: (external link)
https://cepr.org/publications/DP20530 (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:cpr:ceprdp:20530

Ordering information: This working paper can be ordered from
https://cepr.org/publications/DP20530

Access Statistics for this paper

More papers in CEPR Discussion Papers from Centre for Economic Policy Research 33 Great Sutton Street, London EC1V 0DX, UK.
Bibliographic data for series maintained by CEPR ().