Self Directed Productivity Investment on the Job

Abstract

This paper considers a hidden action agency model in which an agent can be incentivized to simultaneously work and exert effort to invest in human capital or process innovation so as to increase productivity in a future period. We characterize the conditions under which the principal would and would not want to incentivize such multitasking, and the conditions under which the agent would want to participate. The firm's support is linked to the outside market, and a separate contingent payment for productivity increase is examined.

Keywords: Training, Productivity Investment

JEL Classification: L20, L21, L22, and L23