The Structure of Wages and Investment in General Training

Journal of Political Economy, Vol. 107, No. 3, June 1999

Posted: 22 Sep 1999

See all articles by Daron Acemoglu

Daron Acemoglu

Massachusetts Institute of Technology (MIT) - Department of Economics; Centre for Economic Policy Research (CEPR); National Bureau of Economic Research (NBER)

Jörn-Steffen Pischke

London School of Economics; National Bureau of Economic Research (NBER); Centre for Economic Policy Research (CEPR); IZA Institute of Labor Economics

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Abstract

In the human capital model with perfect labor markets, firms never invest in general skills and all costs of general training are borne by workers. When labor market frictions compress the structure of wages, firms may pay for these investments. The distortion in the wage structure turns "technologically" general skills into de facto "specific" skills. Credit market imperfections are neither necessary nor sufficient for firm-sponsored training. Since labor market frictions and institutions shape the wage structure, they may have an important impact on the financing and amount of human capital investments and account for some international differences in training practices.

JEL Classification: J24, J31

Suggested Citation

Acemoglu, Daron and Pischke, Jörn-Steffen (Steve), The Structure of Wages and Investment in General Training. Journal of Political Economy, Vol. 107, No. 3, June 1999, Available at SSRN: https://ssrn.com/abstract=161212

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