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Firm-specific training

Felli, Leonardo and Harris, Christopher (2018) Firm-specific training. Journal of Economic Theory, 175. pp. 585-623. ISSN 0022-0531

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Identification Number: 10.1016/j.jet.2018.01.010

Abstract

This paper investigates the market provision of firm-specific training, and identifies the inefficiencies associated with it. Within a general stochastic learning-by-doing model, there is a potential inefficiency in the market provision of firm-specific training. In order to determine whether this inefficiency is in fact present, we analyze two special cases of the model: the accelerated productivity-enhancement model and the accelerated learning model. In both models, the inefficiency is indeed present. However, the nature of the inefficiency depends on the balance between the two key components of training, namely productivity enhancement and employee evaluation. In the accelerated productivity-enhancement model, training results in an increase in productivity enhancement but no change in employee evaluation, and training is overprovided by the market. In the accelerated learning model, training results in a proportionate increase in both productivity enhancement and employee evaluation, and training is underprovided by the market. In both cases, turnover is inefficiently low.

Item Type: Article
Official URL: https://www.journals.elsevier.com/journal-of-econo...
Additional Information: © 2018 Elsevier Inc.
Divisions: Economics
Subjects: H Social Sciences > HB Economic Theory
JEL classification: D - Microeconomics > D6 - Welfare Economics > D61 - Allocative Efficiency; Cost-Benefit Analysis
D - Microeconomics > D8 - Information, Knowledge, and Uncertainty > D86 - Economics of Contract: Theory
J - Labor and Demographic Economics > J2 - Time Allocation, Work Behavior, and Employment Determination and Creation; Human Capital; Retirement > J20 - General
J - Labor and Demographic Economics > J2 - Time Allocation, Work Behavior, and Employment Determination and Creation; Human Capital; Retirement > J24 - Human Capital; Skills; Occupational Choice; Labor Productivity
Sets: Departments > Economics
Collections > Economists Online
Date Deposited: 14 Mar 2018 14:58
Last Modified: 20 Oct 2019 00:08
URI: http://eprints.lse.ac.uk/id/eprint/87222

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