DP1833 The Structure of Wages and Investment in General Training

Author(s): Daron Acemoglu, Jörn-Steffen Pischke
Publication Date: March 1998
Keyword(s): firm sponsored training, General Human Capital, Imperfect Labour Markets
JEL(s): J24, J31, J41
Programme Areas: International Macroeconomics, Human Resources
Link to this Page: cepr.org/active/publications/discussion_papers/dp.php?dpno=1833

In the standard model of human capital with perfect labor markets, workers pay for general training. When labor market frictions compress the structure of wages, firms may invest in the general skills of their employees. The reason is that the distortion in the wage structure turns ``technologically'' general skills into ``specific'' skills. Labor market frictions and institutions, such as minimum wages and union wage setting, are crucial in shaping the wage structure, and thus have an important impact on training. Our results suggest that the more frictional and regulated labor markets in Europe and Japan may generate more firm-sponsored general training than the U.S.