Who Should Invest in Firm Specific Training?

31 Pages Posted: 8 Feb 2001

See all articles by Hessel Oosterbeek

Hessel Oosterbeek

University of Amsterdam - Research Institute in Economics & Econometrics (RESAM); Tinbergen Institute Amsterdam (TIA); Institute for the Study of Labor (IZA)

Randolph Sloof

University of Amsterdam - Faculty of Economics & Business (FEB); Tinbergen Institute

Joep Sonnemans

University of Amsterdam - Amsterdam School of Economics (ASE)

Date Written: February 2, 2001

Abstract

We study experimentally whether employers or workers should invest in firm specific training. Only workers are assumed to have an alternative trading opportunity. Both the turnover costs case where this alternative takes the form of an outside option and the no-friction case where it serves as a threat point are considered. Theory predicts that in the turnover costs case employers have better investment incentives when the outside wage is high, and therefore should make the investment from an efficiency point of view. In the no-friction case employers and workers are predicted to invest the same. Our results are by and large in line with these predictions. For the turnover costs case we do observe that employers invests more than workers do only when the outside wage is high. In the no-friction case employers and workers invest about the same when the outside wage is low, but workers invest more than employers do when this wage is high. Actual private investment returns provide a reasonable explanation for the observed differences. Overall the observed inefficiencies are remarkably similar across the different situations considered. As a result there is only weak evidence that the employer (worker) should make the investment in the turnover costs (no-friction) case.

Keywords: Specific Investments, Labor Relationships, Holdup

Suggested Citation

Oosterbeek, Hessel and Sloof, Randolph and Sonnemans, Joep, Who Should Invest in Firm Specific Training? (February 2, 2001). Available at SSRN: https://ssrn.com/abstract=259248 or http://dx.doi.org/10.2139/ssrn.259248

Hessel Oosterbeek (Contact Author)

University of Amsterdam - Research Institute in Economics & Econometrics (RESAM) ( email )

Roetersstraat 11
Amsterdam
Netherlands
+31 20 525 4242 (Phone)
+31 20 525 5283 (Fax)

HOME PAGE: http://www.fee.uva.nl/scholar/oosterbeek/

Tinbergen Institute Amsterdam (TIA)

Burg. Oudlaan 50
Rotterdam, 3062 PA
Netherlands

Institute for the Study of Labor (IZA)

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

Randolph Sloof

University of Amsterdam - Faculty of Economics & Business (FEB) ( email )

Roetersstraat 11
Amsterdam, 1018 WB
Netherlands
+31 20 525 5241 (Phone)
+31 20 525 4310 (Fax)

Tinbergen Institute ( email )

Gustav Mahlerplein 117
Amsterdam, 1082 MS
Netherlands

Joep Sonnemans

University of Amsterdam - Amsterdam School of Economics (ASE) ( email )

Roetersstraat 11
1018 WB Amsterdam
Netherlands
+31 20 525 4249 (Phone)
+31 20 525 5283 (Fax)

Here is the Coronavirus
related research on SSRN

Paper statistics

Downloads
159
Abstract Views
1,499
rank
203,013
PlumX Metrics