Product Markets and Industry-Specific Training

31 Pages Posted: 31 Mar 2008

See all articles by Hans Gersbach

Hans Gersbach

ETH Zurich - CER-ETH -Center of Economic Reseaarch; IZA Institute of Labor Economics; CESifo (Center for Economic Studies and Ifo Institute); Centre for Economic Policy Research (CEPR)

Armin Schmutzler

University of Zurich - Department of Economics; Centre for Economic Policy Research (CEPR)

Date Written: December 11, 2007

Abstract

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

Gersbach, Hans and Schmutzler, Armin, Product Markets and Industry-Specific Training (December 11, 2007). Available at SSRN: https://ssrn.com/abstract=1113825 or http://dx.doi.org/10.2139/ssrn.1113825

Hans Gersbach

ETH Zurich - CER-ETH -Center of Economic Reseaarch ( email )

Zürichbergstrasse 18
Zurich, 8092
Switzerland
+41 44 632 82 80 (Phone)
+41 44 632 18 30 (Fax)

IZA Institute of Labor Economics

P.O. Box 7240
Bonn, D-53072
Germany

CESifo (Center for Economic Studies and Ifo Institute)

Poschinger Str. 5
Munich, DE-81679
Germany

Centre for Economic Policy Research (CEPR)

London
United Kingdom

Armin Schmutzler (Contact Author)

University of Zurich - Department of Economics ( email )

Zürich, CH-8006
Switzerland

Centre for Economic Policy Research (CEPR) ( email )

London
United Kingdom

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