Product Markets and Industry-Specific Training
31 Pages Posted: 31 Mar 2008
Date Written: December 11, 2007
We develop a product market theory that explains why firms provide their workers with skills that are sufficiently general to be potentially useful for competitors. We consider a model where firms first decide whether to invest in industry-specific human capital, then make wage offers for each others' trained employees and finally engage in imperfect product market competition. Equilibria with and without training, and multiple equilibria can emerge. If competition is sufficiently soft, firms may invest in non-specific training if others do the same. Thereby, they avoid having to pay high wages in order to attract trained workers.
Keywords: industry-specific training, human capital, oligopoly, turnover
JEL Classification: D42, L22, L43, L92
Suggested Citation: Suggested Citation