A Theoretical Model of on-the-Job Training With Imperfect Competition

Stevens, Margaret

doi:10.1093/oxfordjournals.oep.a042147

Cited by 344 publications

(286 citation statements)

References 6 publications

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“…9 Stevens (1994) provides a formal model suggesting that general training is enhanced by smaller labour markets. See also Groen (2006) for empirical support for this proposition.…”

Section: Conceptual Issues and Hypothesesmentioning

confidence: 99%

“…Acemoglu and Pischke, 1999;Manning, 2003) that search frictions, certain labour market institutions (e.g. unions, minimum wages), imperfect competition in small labour markets (Stevens 1994), or asymmetric information in training among current and potential employers may lead to situations where employees capture only a fraction of the productivity gains.…”

Section: Introductionmentioning

confidence: 99%

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The effects of general and firm-specific training on wages and performance: evidence from banking

Jones

Kalmi

Kauhanen

2011

Oxford Economic Papers

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By using new panel data for Finnish banks we study the impact of training on wages and performance. To the best of our knowledge, ours is the first paper to compare explicitly the effects of general and firm-specific workplace training on outcomes for both employees and firms. Unlike much existing literature, we find stronger evidence that training improves worker outcomes rather than organizational performance. Depending upon specification, the estimated wage elasticity with respect to training is in the range of 3-7%, whereas the performance effects vary widely depending on the measures of training intensity. The other key finding is that general training is associated with higher wage and performance effects than is firm-specific training. 2 I IntroductionTwo important issues are raised in most economic studies of training. First, does training increase efficiency and by how much? Second, who reaps the gains from training? In addressing these issues, the standard (Beckerian) theory concludes that in competitive markets, employers will not pay for general training. By definition, general training increases employee productivity by the same amount in the current workplace and elsewhere. If employees participate in general training, their employers have to bid up employees' wages reflecting the productivity increases due to training. If they fail to do so, other potential employers can "poach" these workers and free-ride in training expenses. Hence, according to this theory, in competitive labour markets, employers would finance training only if there are some specific elements in it. By contrast, the early empirical evidence on training revealed that employer-provided training is mostly general in nature and that, nevertheless, employers paid the costs of training (e.g. Lynch 1992; Spletzer, 1998, 1999;Barron et al. 1999).To explain this inconsistency between theory and empirics, many subsequent theorists point to imperfections in labour markets. It is argued (e.g. Acemoglu and Pischke, 1999;Manning, 2003) that search frictions, certain labour market institutions (e.g. unions, minimum wages), imperfect competition in small labour markets (Stevens 1994), or asymmetric information in training among current and potential employers may lead to situations where employees capture only a fraction of the productivity gains.These models also imply that wages do not equal marginal revenue product, and this has motivated recent literature that studies the impact of training on productivity and wages 1 .Consistent with theory grounded in imperfect labour markets, more recent empirical 1 For theoretical literature see e.g. Acemoglu and Pischke (1999) and Booth and Zoega (2004). 3 evidence on the impact of training on wages and productivity finds that there is a wedge between wages and productivity effects and that employees and employers seem to share the benefits from training. This applies both to industry levels studies (Conti 2005;Dearden et al. 2006) and firm level studies (e.g. Ballot et al. 2006). However, w...

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“…9 Stevens (1994) provides a formal model suggesting that general training is enhanced by smaller labour markets. See also Groen (2006) for empirical support for this proposition.…”

Section: Conceptual Issues and Hypothesesmentioning

confidence: 99%

Section: Introductionmentioning

confidence: 99%

The effects of general and firm-specific training on wages and performance: evidence from banking

Jones

Kalmi

Kauhanen

2011

Oxford Economic Papers

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“…The size of the labor market affects returns to tenure via the transferability of human capital (Stevens, 1994;Di Addario andPatacchini, 2008, Lazear, 2009). In large urban labor markets, on-the-job training will improve the outside options and improve the bargaining position of workers versus firms.…”

Section: Introductionmentioning

confidence: 99%

Education, experience, and urban wage premium

Carlsen

Rattsø

Stokke

2016

Regional Science and Urban Economics

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Recent studies investigate the urban wage premium associated with education and work experience. We study the effect of work experience and firm tenure across education groups. All education groups benefit more from working in cities, and the extra city wage premium highly educated enjoy over less educated workers is increasing with city work experience. Interestingly, the city wage premium of less educated workers is increasing in firm tenure, while the highly educated gain more by shifting jobs between firms. The analysis is based on administrative registers covering all full time private sector workers in Norway, about 4.7 million worker-year observations.

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“…Moreover, the workers are reluctant to invest in these skills due to credit constraints and the uncertainty they face with respect to future benefits (e.g. Stevens, 1994Stevens, , 1999Acemuglu and Pischke, 1999). Non-optimal investments in transferable training particularly hold for vocational training that is relevant in a particular sector of industry.…”

Section: Introductionmentioning

confidence: 99%

Training and expectations on job mobility in the call centres sector

Sieben

Grip²

2004

Journal of European Industrial Training

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Analyses whether the participation of workers in general, sector‐specific, and firm‐specific training affects their expectations on job mobility within or outside the call centres sector. Distinguishes between the perceived difficulty to find an equally attractive job and the inclination to quit for another job. Employing data on 525 call centre agents working in eight call centres in The Netherlands, finds that training does not significantly affect the perceived labour market perspectives of call centre agents, nor influence expected job mobility inside or outside the sector. The inclination to quit the present job within two years is the same for agents with and without training. There is one exception, however. Agents who followed firm‐specific training significantly less often considered quitting for a job in another call centre. All this is good news for firms offering training. Another finding, however, might be more problematic. The work experience of agents positively affects their labour market perspectives inside the sector. In addition, agents with more experience are more inclined to quit for a job in another call centre. This means that firms need to keep their employees satisfied.

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A Theoretical Model of on-the-Job Training With Imperfect Competition

Cited by 344 publications

References 6 publications

The effects of general and firm-specific training on wages and performance: evidence from banking

The effects of general and firm-specific training on wages and performance: evidence from banking

Education, experience, and urban wage premium

Training and expectations on job mobility in the call centres sector

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