Working Paper: CEPR ID: DP16305
Authors: Heski Barisaac; Clare Leaver
Abstract: When is general training under-provided? We study this classic question in a model of a competitive labour market. Workers vary in firm-specific and general skills. Firms’ choices of information disclosure play a key role. Disclosing general human capital information on bad matches, but revealing nothing about good matches, leads to an efficient allocation of workers. This also creates adverse selection that enables workers to pay for efficient training. This information structure resembles the outplacement support commonly found in professional services firms. Moreover, it implies that wages of released workers can be higher than wages of those who are retained.
Keywords: No keywords provided
JEL Codes: No JEL codes provided
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| disclosing general human capital information on bad matches (J79) | efficient allocation of workers (J29) |
| firm's choice of disclosure policy (G38) | information available to rival firms (L19) |
| information available to rival firms (L19) | wage offers (J31) |
| wage offers (J31) | allocation of workers (J29) |
| disclosing information about bad matches (C78) | efficient training (D61) |
| efficient training (D61) | lower wages in the second period (J31) |
| disclosing information about bad matches (C78) | wages of released workers > wages of retained workers (J63) |