Employer Incentives for Providing Informal On-the-Job Training in the Presence of On-the-Job Search

21 Pages Posted: 27 Nov 2013 Last revised: 1 Dec 2016

See all articles by Tim Huegerich

Tim Huegerich

Christensen Associates

Seung-Gyu Sim

Aoyama Gakuin University

Date Written: December 1, 2016

Abstract

We analyze the provision of informal general training in the frictional labor market in which employers cannot commit to training levels and workers cannot commit to stay. We demonstrate that employers' training decisions are driven by both an investment motive, to improve productivity, and a compensation motive, to increase employee retention. The investment motive decreases with higher wages, while the compensation motive increases. In our calibration exercises, the former dominates, which creates a negative relationship between wages and training. Furthermore, in a sharp contrast to the recent studies missing the compensation motive, lessening the search frictions raises overall training levels due to enhanced compensation motives, approaching Becker's result for a frictionless labor market.

Keywords: On-the-job Training, On-the-job Search, Compensation Motive, Investment Motive

JEL Classification: J24, J33, J64

Suggested Citation

Huegerich, Timothy and Sim, Seung-Gyu, Employer Incentives for Providing Informal On-the-Job Training in the Presence of On-the-Job Search (December 1, 2016). Available at SSRN: https://ssrn.com/abstract=2359440 or http://dx.doi.org/10.2139/ssrn.2359440

Timothy Huegerich

Christensen Associates ( email )

4610 University Ave.
Suite 700
Madison, WI 53705-2164
United States

Seung-Gyu Sim (Contact Author)

Aoyama Gakuin University ( email )

4-4-25 Shibuya, Shibuya-ku
Tokyo, 150-8366
Japan

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