Training and Search on the Job

Lentz, Rasmus; Roys, Nicolas

doi:10.20955/wp.2016.025

Working Paper

Training and Search on the Job

Abstract: The paper studies human capital accumulation over workers? careers in an on the job search setting with heterogenous firms. In renegotiation proof employment con- tracts, more productive firms provide more training. Both general and specific training induce higher wages within jobs, and with future employers, even conditional on the future employer type. Because matches do not internalize the specific capital loss from employer changes, specific human capital can be over-accumulated, more so in low type firms. While validating the Acemoglu and Pischke (1999) mechanisms, the analysis nevertheless arrives at the opposite conclusion: That increased labor market friction reduces training in equilibrium.

Keywords: Wage contracts; human capital; training; wage dispersion; frictional labor markets; optimal contract design; firm heterogeneity; sorting;

JEL Classification: D21; D43; D83; E24; J24; J31; J33; J41; J62; J63; J64;