Abstract
Mark A. Loewenstein and James R. Spletzer (1994)
"Dividing the Costs and Returns to General Training."
Unlike other data sets, recent data from the National
Longitudinal Survey of Youth have information on who bears
the explicit costs of training. The data indicate that the
employer almost always pays the explicit cost of training
that the worker receives on the employer's premises and often
pays for the explicit costs of what appears to be general
training: seminars or training programs outside of work and
training that a worker receives in business school, an
apprenticeship program, a vocational or technical institute,
or a correspondence course. Furthermore, our wage regressions
indicate that completed spells of general training paid for
by previous employers have a larger effect on the wage than
completed spells of general training paid for by the current
employer. While these results are contrary to the
conventional human capital model, we present a model that
demonstrates how contract enforcement considerations can lead
to employers paying for purely general training. An employer
in our model offers a future wage guarantee in order to
provide an assurance that he will not extract excessive rents
from workers who demonstrate by not quitting that they place
a relatively high valuation on the employer's job. When this
wage guarantee is binding, a small increase in a worker's
productivity caused by an increase in his stock of human
capital will not cause the employer to pay a higher wage.
This sharing of the returns to general training provides the
employer with an incentive to share the cost.
Last Modified Date: July 19, 2008
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