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A Theory of Factor Mobility

Gene M. Grossman and Carl Shapiro
Journal of Political Economy
Vol. 90, No. 5 (Oct., 1982), pp. 1054-1069
Stable URL: http://www.jstor.org/stable/1837133
Page Count: 16
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Since scans are not currently available to screen readers, please contact JSTOR User Support for access. We'll provide a PDF copy for your screen reader.
A Theory of Factor Mobility
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Abstract

In this paper we study the determinants of intersectoral factor mobility. Mobility is the outgrowth of a prior investment decision. In particular, we focus on the human capital (i.e., training) decisions of workers. Uncertainty isa critical feature in such training decisions. The acquisition of general (vs. specific) skills allows a worker to select the more favorable sector after uncertainty is resolved. Thus general training has option value, which is enhanced by increases in risk. General training is a form of self-insurance. We study the impact of conventional insurance opportunities on training decisions. We find that the availabilty of income insurance does not necessarily imply less mobile workers.

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