Training, Job Security and Incentive Wages

No 955, CESifo Working Paper Series from CESifo

Abstract: This paper considers the optimal level of firm-specific training by taking into account the positive effect of training on the expected duration of workers’ current employment. In the framework of an efficiency wage model, a short expected job tenure represents a disamenity that reduces the penalty from shirking. As this disamenity increases, workers have an incentive to continue providing a positive level of effort only if they are compensated by a higher wage. We endogenize the employment separation rate by introducing firm-specific training. Firm-specific training creates a rent that is lost if the worker is separated from the firm. As a result, the firm will be more reluctant to fire its trained workforce in a recession. This implies that firm-specific training can decrease current wages as it implies a credible commitment to lower future labour turnover.

Keywords: efficiency wages; firm-specific training (search for similar items in EconPapers)
Date: 2003
New Economics Papers: this item is included in nep-lab
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

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Related works:
Journal Article: TRAINING, JOB SECURITY AND INCENTIVE WAGES (2008)
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Persistent link: https://EconPapers.repec.org/RePEc:ces:ceswps:_955

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