Working Paper: CEPR ID: DP4580
Authors: Leonardo Felli; Christopher Harris
Abstract: This Paper introduces two complementary models of firm-specific training: an informational model and a productivity-enhancement model. In both models, market provision of firm-specific training is inefficient. The nature of the inefficiency depends, however, on the balance between the two key components of training, namely productivity enhancement and employee evaluation. In the informational model, training results in a proportionate increase in productivity enhancement and employee evaluation, and training is underprovided by the market. In the 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 both models, turnover is inefficiently low.
Keywords: Employee Evaluation; Firm-Specific Human Capital; Firm-Specific Training; Productivity Enhancement
JEL Codes: C78; D83; J41
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Training (M53) | Productivity Enhancement (O49) |
| Training (M53) | Employee Evaluation (M51) |
| Training (M53) | Turnover (J63) |
| Training (M53) | Market Inefficiencies (G14) |
| Training (Informational Model) (M53) | Underprovision of Training (J24) |
| Training (Productivity-Enhancement Model) (J24) | Overprovision of Training (M53) |