The Theory of Human Capital Revisited: On the Interaction of General and Specific Investments

Anke Kessler and Lülfesmann, Christoph
Authors registered in the RePEc Author Service: Christoph Lülfesmann

No 2533, CEPR Discussion Papers from C.E.P.R. Discussion Papers

Abstract: Human capital theory distinguishes between training in general-usage and firm-specific skills. In his seminal work, Becker (1964) argues that employers will not be willing to invest in general training when labour markets are competitive. However, they are willing to invest in specific training because it cannot be transferred to outside firms. The paper reconsiders Becker's theory. We show that there exists an incentive complementarity between employer-sponsored general and specific investments: the possibility to provide specific training leads the employer to invest in general human capital. Conversely, the latter reduces the hold-up problem that arises with respect to the provision of firm-specific training. These findings hold even if there is no technological link between the two types of training. We also consider the virtues of long-term contracting and discuss some empirical observations that could be explained by the model.

Keywords: Human capital formation; General and specific training; Hold-up problem (search for similar items in EconPapers)
JEL-codes: C78 D82 L14 L15 (search for similar items in EconPapers)
Date: 2000-08
References: Add references at CitEc
Citations: View citations in EconPapers (6)

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Related works:
Journal Article: The Theory of Human Capital Revisited: on the Interaction of General and Specific Investments (2006)
Working Paper: The Theory of Human Capital Revisited: On the Interaction of General and Specific Investments (2002)
Working Paper: The Theory of Human Capital Revisited: On the Interaction of General and Specific Investments (2000)
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