The Transfer of Human Capital

49 Pages Posted: 24 Nov 2000 Last revised: 16 Sep 2010

See all articles by Boyan Jovanovic

Boyan Jovanovic

New York University - Department of Economics

Yaw Nyarko

New York University - Leonard N. Stern School of Business - Department of Economics

Date Written: August 1994

Abstract

Most of our productive knowledge was handed down to us by previous generations. The transfer of knowledge from the old to the young is therefore a cornerstone of productivity growth. We study this process in a model in which the old sell knowledge to the young - - old workers train the young, and charge them for this service. We take an information-theoretic approach in which training occurs if a young agent watches an old worker perform a task. This assumption has plenty of empirical support -- in their first three months on the job, young workers spend about five times as long watching others work as they do in formal training programs. Equilibrium is not constrained Pareto optimal. The old have private information, and this gives rise to an adverse selection problem: some old agents manage to sell skills that the young would not buy (if only they knew exactly what they were buying). We derive the implications for the lifetime of technological lines, and we show that the model generates a negative relation between a firm's productivity and its probability of failure.

Suggested Citation

Jovanovic, Boyan and Nyarko, Yaw, The Transfer of Human Capital (August 1994). NBER Working Paper No. w4823, Available at SSRN: https://ssrn.com/abstract=250352

Boyan Jovanovic (Contact Author)

New York University - Department of Economics ( email )

19 w 4 st.
New York, NY 10012
United States

Yaw Nyarko

New York University - Leonard N. Stern School of Business - Department of Economics ( email )

269 Mercer Street
New York, NY 10003
United States
212-998-8928 (Phone)
212-995-4186 (Fax)

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