Worker Heterogeneity, New Monopsony, and Training

24 Pages Posted: 30 May 2008

See all articles by Alison L. Booth

Alison L. Booth

Australian National University (ANU) - Research School of Social Sciences (RSSS); Centre for Economic Policy Research (CEPR); IZA Institute of Labor Economics

Gylfi Zoega

University of Iceland; University of London - Birkbeck College; Centre for Economic Policy Research (CEPR)

Abstract

A worker's output depends not only on his/her own ability but also on that of colleagues, who can facilitate the performance of tasks that each individual cannot accomplish on his/her own. We show that this common-sense observation generates monopsony power and is sufficient to explain why employers might expend resources on training employees even when the training is of use to other firms. We show that training will take place in better-than-average or good firms enjoying greater monopsony power, whereas bad firms will have low-ability workers unlikely to receive much training.

Suggested Citation

Booth, Alison L. and Zoega, Gylfi, Worker Heterogeneity, New Monopsony, and Training. LABOUR, Vol. 22, Issue 2, pp. 247-270, June 2008, Available at SSRN: https://ssrn.com/abstract=1138848 or http://dx.doi.org/10.1111/j.1467-9914.2007.00406.x

Alison L. Booth (Contact Author)

Australian National University (ANU) - Research School of Social Sciences (RSSS) ( email )

Canberra, Australian Capital Territory 0200
Australia
+61 2 6125 3285 (Phone)
+61 2 6125 0182 (Fax)

Centre for Economic Policy Research (CEPR)

London
United Kingdom

IZA Institute of Labor Economics

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

Gylfi Zoega

University of Iceland ( email )

IS-101 Reykjavik
Iceland

University of London - Birkbeck College ( email )

Malet Street
London, WC1E 7HX
United Kingdom

Centre for Economic Policy Research (CEPR)

London
United Kingdom

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