Working Paper: NBER ID: w5605
Authors: Daron Acemoglu; J. Steffen Pischke
Abstract: This paper offers and tests a theory of training whereby workers do not pay for general training they receive. The crucial ingredient in our model is that the current employer has superior information about the worker's ability relative to other firms. This informational advantage gives the employer an ex post monopsony power over the worker which encourages the firm to provide training. We show that the model can lead to multiple equilibria. In one equilibrium quits are endogenously high, and as a result employers have limited monopsony power and are willing to supply only little training, while in another equilibrium quits are low and training high. We also derive predictions from our model not shared by other explanations of firm sponsored training. Using microdata from Germany, we show that the predictions of the specific human capital model are rejected, while our model receives support from the data.
Keywords: training; monopsony power; asymmetric information; labor market
JEL Codes: J24; J31
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Employer's informational advantage (J79) | Monopsony power (J42) |
| Monopsony power (J42) | Training investments by firms (M53) |
| Quit rates (J63) | Training investments by firms (M53) |
| High quit rates (J63) | Limited training (M53) |
| Low quit rates (J26) | High training levels (J24) |
| Military quitters (H56) | Higher wages than voluntarily quitting workers (J63) |
| Absence of monopsony power (J42) | Higher wages for military quitters (J45) |