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A Theoretical Model of On-the-Job Training with Imperfect Competition

Margaret Stevens
Oxford Economic Papers
New Series, Vol. 46, No. 4 (Oct., 1994), pp. 537-562
Published by: Oxford University Press
Stable URL: http://www.jstor.org/stable/2663510
Page Count: 26
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A Theoretical Model of On-the-Job Training with Imperfect Competition
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Abstract

Training for skills which are transferable to other firms, but for which the external labour market is imperfectly competitive, cannot be analysed using the traditional tools of general and specific training. It is shown that firms (as well as workers) have an incentive to invest in such training, but that there is an externality problem which may lead to under-investment. Using a formal model, it is shown that the problem is most severe at `intermediate' levels of labour market competition. The effects are that too few workers are trained, and there is over-investment in purely specific training.

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