Keywords: Human Capital Formation, General Training,
Specific Training, Hold-up Problem
JEL-Classification: C78, L14, L15
Human
capital theory distinguishes between training in general-usage and firm-specific skills. In his seminal work,
Becker (1964) argues that employers will not be willing to invest in general
training when labor markets are competitive. However, they are willing to
invest in specific training because it cannot be transferred to outside firms.
The paper reconsiders Becker's theory. We show that there exists an incentive
complementarity between employer-sponsored general and specific investments:
the possibility to provide specific training leads the employer to invest in
general human capital. Conversely, the latter reduces the hold-up problem that
arises with respect to the provision of firm-specific training. We also
consider the virtues of long-term contracting and discuss some empirical
observations that could be explained by the model.
Copyright 1999 © A. Kessler