The Theory of Human Capital Revisited: On the Interaction of General and Specific Investments

Abstract

Standard-Nutzungsbedingungen:Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Zwecken und zum Privatgebrauch gespeichert und kopiert werden.Sie dürfen die Dokumente nicht für öffentliche oder kommerzielle Zwecke vervielfältigen, öffentlich ausstellen, öffentlich zugänglich machen, vertreiben oder anderweitig nutzen.Sofern die Verfasser die Dokumente unter Open-Content-Lizenzen (insbesondere CC-Lizenzen) zur Verfügung gestellt haben sollten, gelten abweichend von diesen Nutzungsbedingungen die in der dort genannten Lizenz gewährten Nutzungsrechte. Human capital theory distinguishes between training in general-usage and firm-specific skills. Terms of use: Documents inIn his seminal work, Becker (1964) argues that employers will not be willing to invest in general training when labor markets are competitive. However, they are willing to invest in specific training because it cannot be transferred to outside firms. The paper reconsiders Becker's theory. We show that there exists an incentive complementarity between employersponsored general and specific investments: the possibility to provide specific training leads the employer to invest in general human capital. Conversely, the latter reduces the hold-up problem that arises with respect to the provision of firm-specific training. We also consider the virtues of long-term contracting and discuss some empirical observations that could be explained by the model. JEL Classification: C78, L14, L15, D82.

Firm‐Sponsored General Training

“…Thus, there is underinvestment in human capital, and, in equilibrium, investment in general training is positively related to the probability of a worker staying with the same employer in the second period. Finally, Kessler and Lü lfelsmann (2001), on work done independently, also address cooperative specific investments coupled with general investments in a competitive labor market and derive similar results. They do not, however, consider delayed general training.…”

Are Firm Innovativeness and Firm Age Relevant for the Supply of Vocational Training? – A Study Based on Swiss Micro Data

“…The main reason for this conclusion is the existence of labour markets imperfections due to asymmetric information with respect to the productivity of external employees, search costs, labour market institution such as unions and minimum wages, etc. However, in a recent paper Kessler and Lülfesmann [10] show that when general and specific skills are complementary to each other employers may be willing to sponsor general training even in competitive labour markets.…”

The ‘new firm paradigm’ and the provision of training: The impact of ICT, workplace organization and human capital

“…In older empirical work the authors were puzzled by the finding that net costs of apprenticeship training were positive in many occupations. Therefore the investment theory of training has been further developed, with Pischke (1998, 1999) probably the most influential contributions (see also Dustman and Schönberg, 2009;Elbaum and Sing, 1995;Finegold and Wagner, 2002;Franz and Soskice, 1995;Harhoff and Kane, 1997;Kessler and Lülfesmann, 2006;Ryan and Wolter, 2011). This literature explains the empirical finding of widespread net costs of firm-based training mostly with labor market imperfections: asymmetric information between the training firm and other companies about the trainees' productivity; unions and work councils enforcing firms to accept net training costs during apprenticeship; mobility costs (job search, costs of introduction at a new job etc.…”