This paper investigates the conditions under which firms are willing to invest in the general human capital of their workers. We show that a key ingredient is the presence of labor market imperfections which distort the wage structure. In particular, firms will invest in training if the gap between productivity and wages is larger for more skilled workers. We outline a number of specific mechanisms which lead to a distorted equilibrium wage structure, and thus induce rms to invest in worker training. The predictions of our model differ from the standard Beckerian analysis of general human capital. We argue that a model with imperfect labor markets is more consistent with the empirical evidence on the financing of general training.

Abstract not found

Nominally free, unrestricted training in portable computer skills is offered by the majority of U.S. temporary help supply (THS) establishments, a practice that is inconsistent with the competitive model of training. This paper asks why temporary help firms provide free general skills training. The answer proposed is that in addition to skills formation, training plays an informational role at THS firms by eliciting private information about worker ability. The model is built on the premise that training is more productive and therefore valuable to high ability workers. Firms offer a package of training and initially lower wages that induces self-selection. Workers of high perceived ability choose training in anticipation of a steeper wage profile while low ability workers are deterred by limited expected gains. Firms profit from their sunk training investment via their short-run informational advantage about ability and thereby limited monopsony power. Market competition among THS firms reduces employer rents, yielding higher wages and more training. Detailed tests of the model using representative establishment data on wages and training find strong support. The analysis demonstrates that beyond providing spot market labor, THS firms gather and sell information about worker quality to clients. The rapid growth of THS as a labor market information broker implies that the demand for worker screening is rising. (JEL D82, J31)

We analyze a model where a multinational fir can use a superior technology in a foreign subsidiary only after training a local worker. Technological spillovers from foreign direct investment arise when this worker is later hired by a local firm Pecuniary spillovers arise when the foreign affiliat pays the trained worker a higher wage to prevent her from moving to a local competitor. We study conditions under which these spillovers occur. We also show that the multinational fir might fin it optimal to export instead of investing abroad to avoid dissipation of its intangible assets or the payment of a higher wage to the trained worker.

I review the two most popular explanations for the differential trends in wage inequality in US/ UK and Europe: that relative supply of skills increased faster in Europe, and that European labour market institutions prevented inequality from increasing. Although these explanations go some way towards accounting for the differential cross-country inequality trends, it also appears that relative demand for skills increased differentially across countries. I develop a simple theory where labour market institutions creating wage compression in Europe also encourage more investment in technologies increasing the productivity of less-skilled workers, implying less skill-biased technical change in Europe than the US. While over the 1980s wage inequality and returns to education increased sharply in the US and the UK, there was less of an increase, or even no change, in continental European economies; see, for example, Freeman and Katz (1995), Nickell and Bell (1996), Katz et al. (1995). Table 1 illustrates these trends by showing an estimate of the education pre-mium and the log differences of the 90th and the 10th percentiles of the wage distribution for a number of countries from the Luxembourg Income Studies

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Abstract not found

We exploit administrative data on young German workers and their employers to study the long-term effects of an early job loss. To account for non-random sorting of workers into firms with different turnover rates and for selective job mobility, we use changes over time in firm- and age-specific labor demand as an instrument for displacement. We find that wage losses of young job losers are initially 15 % but fade to zero within five years. Only workers leaving very large establishments suffer persistent losses. A comparison of estimators implies that initial sorting, negative selection, and voluntary job mobility may have biased previous U.S. studies finding permanent effects of early displacements. (JEL J63, J65)

Abstract. This survey organizes and summarizes existing theoretical work on private sector training. The theoretical models focus on investment efficiency, finance and turnover. Recent developments in the on-the-job training literature are characterized by strategic interaction between employers and employees and emphasize market imperfections.

An extensive theoretical literature has developed that investigates the role of promotions as a signal of worker ability. There have been no tests, however, of the empirical validity of this idea. In this paper we develop the theory in a manner that allows us to generate testable predictions, and then investigate the validity of these predictions using a longitudinal data set that contains detailed information concerning the internal-labor-market history of a medium-sized firm in the financial-services industry. Our results support the notion that signaling is both a statistically significant and economically significant factor in promotion decisions. The paper also contributes to the extensive literature on the An extensive theoretical literature has investigated the idea that promotions serve as a signal of worker ability. 1 By this we mean that when a worker is promoted the event is observed by other potential employers, and these other firms infer the worker is of high ability. Despite the significant theoretical attention paid to this idea, however, there has been no empirical investigation of the theory’s real-world