DP11138 Relational Knowledge Transfers
|Author(s):||Luis Garicano, Luis Rayo|
|Publication Date:||March 2016|
|Keyword(s):||general human capital, international joint ventures, relational contracts|
|JEL(s):||D86, J24, L24, M53|
|Programme Areas:||Labour Economics, Industrial Organization|
|Link to this Page:||www.cepr.org/active/publications/discussion_papers/dp.php?dpno=11138|
An expert with general knowledge trains a cash-constrained novice. Faster training increases the novice’s productivity and his ability to compensate the expert; it also shrinks the stock of knowledge yet to be transferred, reducing the expert’s ability to retain the novice. The profit-maximizing agreement is a multi-period apprenticeship in which knowledge is transferred gradually over time. The expert adopts a " 1/e rule" whereby, at the beginning of the relationship, the novice is trained just enough to produce a fraction 1/e of the efficient output. This rule causes inefficiently lengthy relationships that grow longer the more patient the players. We discuss policy interventions.