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Efficiency Wages, Labor Heterogeneity and the Financing of the Training Cost

Xavier Wauthy and Yves Zenou ()

No 1997022, LIDAM Discussion Papers IRES from Université catholique de Louvain, Institut de Recherches Economiques et Sociales (IRES)

Abstract: We consider a dual labor market with a continuum of heterogeneous workers differentiated by their ability of acquiring a specific training. In the primary sector, jobs require 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)
Pages: 30
Date: 1997-09-01
New Economics Papers: this item is included in nep-lab
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