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Insider power breeds human capitalists

Muysken Joan and Thomas Zwick ()

No 17, Research Memorandum from Maastricht University, Maastricht Research School of Economics of Technology and Organization (METEOR)

Abstract: The focus of this paper is on rent distribution under different labour market regimes. When workers determine human capital investment and wages freely, while the firm sets labour demand, the rent created is shared. Investment in human capital is then inefficiently low. When there are unemployed potential entrants threatening to enter and catch some of the rent, however, the insiders have to concede a higher share of the rent to the firm. They might however erect barriers to entry by sinking costs for investment inhuman capital. It is shown under which circumstances rents are shared between insiders and outsiders by allowing the latter ones to enter the labour market. Finally, it is shown which consequences on rent creation and labour demand the behaviour of the insiders has.

Keywords: labour economics (search for similar items in EconPapers)
Date: 1996
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