Working Paper: CEPR ID: DP3468
Authors: Espen Moen; Åsa Rosen
Abstract: We analyse the efficiency of the labour market outcome in a competitive search equilibrium model with endogenous turnover and endogenous general human capital formation. We show that search frictions do not distort training decisions if firms and their employees are able to coordinate efficiently, for instance, by using long-term contracts. In the absence of efficient coordination devices there is too much turnover and too little investments in general training. Nonetheless, the number of training firms and the amount of training provided are constrained optimal, and training subsidies therefore reduce welfare.
Keywords: efficiency; matching; poaching; training
JEL Codes: J24; J41; J63; J64
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| coordination (P11) | training investment outcomes (J24) |
| turnover (J63) | reduced training investments (M53) |
| training subsidies (M53) | welfare outcomes (I38) |
| internal efficiency (D61) | labor market outcomes (J48) |
| poaching firms (L19) | training investments (M53) |