A Model of Training Policies in an Imperfectly Labour Market

15 Pages Posted: 24 Mar 2009

Date Written: November 1, 2005


According to human capital theory training underinvestment can arise in case of imperfect competition in the labour markets and when workers are credit constrained. In both cases training policies have to be considered in order to increase the amount of training and to alleviate the consequences of underinvestment. The model developed in this paper puts in evidence the structure of costs and benefits on which the decisions of investment in human capital by firms and workers depend under the hypothesis of imperfect labour markets. Several options of training policy are analysed through the model and their outcomes compared for what concerns the level of training and other features like the distribution of costs and benefits and wage differentials between trainees and trained workforce. The second section draws a theoretical scheme of evaluation of training policies effectiveness in connection with the structural characteristics of the markets. The third section develops the model of analysis of the enterprises' choices relative to training under the hypothesis of an imperfect labour market and in the presence of different policies and of collective wage bargaining. The last section synthesizes main results and indicates some prospects of further research.

Keywords: human capital, training investments, training policies, grants

JEL Classification: J24, J31

Suggested Citation

Croce, Giuseppe, A Model of Training Policies in an Imperfectly Labour Market (November 1, 2005). Available at SSRN: https://ssrn.com/abstract=1361212 or http://dx.doi.org/10.2139/ssrn.1361212

Giuseppe Croce (Contact Author)

University of Rome I ( email )

Piazzale Aldo Moro 5
Roma, Rome 00185

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