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Skill acquisition and wage competition with heterogeneous workers and firms

Author

Listed:
  • HAMILTON, Jonathan

    (Economics Department Warrington College of Business University of Florida, United States)

  • THISSE, Jacques-François

    (Center for Operations Research and Econometrics (CORE), Université catholique de Louvain (UCL), Louvain la Neuve, Belgium)

  • ZENOU, Yves

    (Stockholm University and at the Research Institute of Industrial Economics)

Abstract
We study labor market competition with heterogeneous firms and consumers. Worker types are continuously distributed within the population and a finite number of firms have specific skill requirements. Specific human capital investment is the cost of training a worker to be able to work for a particular firm and depends on the difference between the worker’s skill type and the firm’s skill requirement. A firm’s profit equals its output minus wages, its share of training costs, and a fixed cost. We solve for symmetric free-entry Nash equilibria of the wage offer game under two different information structures. When firms can identify worker types before employment, firms can pay different net wages to workers with different training costs. When firms cannot identify worker training costs in advance, firms pay workers equal wages, but workers absorb training costs. The level of fixed costs, the size of the labor market, and the cost of investment in human capital all affect the equilibrium settings. We also consider different tax instruments to increase allocative efficiency and to finance investment in general human capital.

Suggested Citation

  • HAMILTON, Jonathan & THISSE, Jacques-François & ZENOU, Yves, 1997. "Skill acquisition and wage competition with heterogeneous workers and firms," LIDAM Discussion Papers CORE 1997022, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
    • Handle: RePEc:cor:louvco:1997022
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    File URL: https://sites.uclouvain.be/core/publications/coredp/coredp1997.html
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    Citations

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    Cited by:

    1. Ritter, Peer & Walz, Uwe, 1998. "Local unemployment and specialisation," Tübinger Diskussionsbeiträge 135, University of Tübingen, School of Business and Economics.

    More about this item

    Keywords

    endogenous wage setting; education financing; median voter; information structure;
    All these keywords.

    JEL classification:

    • J41 - Labor and Demographic Economics - - Particular Labor Markets - - - Labor Contracts
    • I22 - Health, Education, and Welfare - - Education - - - Educational Finance; Financial Aid

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