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Labour Contracts and Efficiency in on-the-Job Training

Margaret Stevens
The Economic Journal
Vol. 104, No. 423 (Mar., 1994), pp. 408-419
Published by: Wiley on behalf of the Royal Economic Society
DOI: 10.2307/2234760
Stable URL: http://www.jstor.org/stable/2234760
Page Count: 12
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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.
Labour Contracts and Efficiency in on-the-Job Training
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Abstract

Two sources of inefficiency in the provision of on-the-job training are examined: an externality between firms which arises if there is imperfect competition between firms in the labour market, and allocation inefficiency due to asymmetry of information about the value of the trained worker. The second source of inefficiency may compound the first. Various contracts between the worker and the training firm are considered. Analysis of a simple example suggests that a contract in which the wage is chosen by the firm performs best, according to the criteria of reducing both types of inefficiency.

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