Working Paper: CEPR ID: DP3940
Authors: Hans Gersbach; Armin Schmutzler
Abstract: We develop a product market theory that explains why firms invest in general training of their workers. We consider a model where firms first decide whether to invest in general human capital, then make wage offers for each other?s trained employees and finally engage in imperfect product market competition. Equilibria with and without training, and multiple equilibria can emerge. If competition is sufficiently soft and trained workers are substitutes, firms may invest in non-specific training if others do the same, because they would otherwise suffer a competitive disadvantage or need to pay high wages in order to attract trained workers. Government intervention can be socially desirable to turn training into a focal equilibrium.
Keywords: General Training; Human Capital; Oligopoly; Turnover
JEL Codes: D42; L22; L43
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Soft competition (L13) | Investment in general training (M53) |
| Investment in general training (M53) | Wage offers (J31) |
| Wage offers (J31) | Product market profits (L19) |
| Investment in general training (M53) | Product market profits (L19) |
| Training (M53) | Competitor's productivity (D24) |
| Government intervention (O25) | Training equilibrium (C62) |