Journal Article

Training and Innovation in an Imperfect Labour Market

Daron Acemoglu

in The Review of Economic Studies

Published on behalf of Review of Economic Studies Ltd

Volume 64, issue 3, pages 445-464
Published in print July 1997 | ISSN: 0034-6527
Published online July 1997 | e-ISSN: 1467-937X | DOI: http://dx.doi.org/10.2307/2971723
Training and Innovation in an Imperfect Labour Market

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This paper shows that in a frictional labour market part of the productivity gains from general training will be captured by future employers. As a result, investments in general skills will be suboptimally low, and contrary to the standard theory, part of the costs may be borne by the employers. The paper also demonstrates that the interaction between innovation and training leads to an amplification of this inefficiency and to a multiplicity of equilibria. Workers are more willing to invest in their skills by accepting lower wages today if they expect more firms to innovate and pay them higher wages in the future. Similarly, firms are more willing to innovate when they expect the quality of the future workforce to be higher, thus when workers invest more in their skills.

Journal Article.  0 words. 

Subjects: Economics

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