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: | 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.