Firm-Sponsored General Training in a Frictionless Labor Market

Felipe Balmaceda ()

ILADES-UAH Working Papers from Universidad Alberto Hurtado/School of Economics and Business

Abstract: In this paper I show that, contrary to Becker's (1962) Human Capital theory and consistent with the evidence, in a frictionless labor market model firms pay for general training, while the worker receives the full return on general training, and the worker and the firm share the returns on specific investements. Furthermore, the presence of general training helps to alliviate the firms incentives to underinvest in specific training and that delayed general training helps to alleviate the worker´s incentives to underinvestment in specific training because general and specific training are strategic complements. I also show that these results are robust to long-term contracts and that several institutional arrangements that help to alleviate the underinvestment problem in specific training may also help to alleviate the underinvestment problem in general training.

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Working Paper: Firm Sponsored General Training in a Frictionless Labor Market (2002)
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