Is Wage Compression a Necessary Condition for Firm-Financed General Training?

18 Pages Posted: 21 Jun 2001

See all articles by Alison L. Booth

Alison L. Booth

Australian National University (ANU) - Research School of Social Sciences (RSSS); Centre for Economic Policy Research (CEPR); IZA Institute of Labor Economics

Gylfi Zoega

University of Iceland; University of London - Birkbeck College; Centre for Economic Policy Research (CEPR)

Date Written: June 2001

Abstract

It is well known that workers in Europe appear to receive more firm-provided general training than their counterparts in the United States. Moreover, there is considerable evidence that firms, in many cases, pay for the general training, contrary to the predictions of Becker (1964). In important recent contributions, Acemoglu and Pischke argue that it is through wage compression that unions and other labour-market institutions induce firms to invest in general training. We show that while wage compression can make firms more willing to pay for training, it does not constitute a necessary condition for firm-sponsored training.

Keywords: Firm-financed general training, absolute- and relative wage compression

JEL Classification: J24, J31

Suggested Citation

Booth, Alison L. and Zoega, Gylfi, Is Wage Compression a Necessary Condition for Firm-Financed General Training? (June 2001). Available at SSRN: https://ssrn.com/abstract=274538

Alison L. Booth (Contact Author)

Australian National University (ANU) - Research School of Social Sciences (RSSS) ( email )

Canberra, Australian Capital Territory 0200
Australia
+61 2 6125 3285 (Phone)
+61 2 6125 0182 (Fax)

Centre for Economic Policy Research (CEPR)

London
United Kingdom

IZA Institute of Labor Economics

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

Gylfi Zoega

University of Iceland ( email )

IS-101 Reykjavik
Iceland

University of London - Birkbeck College ( email )

Malet Street
London, WC1E 7HX
United Kingdom

Centre for Economic Policy Research (CEPR)

London
United Kingdom

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