The Effects of Globalization on Worker Training
39 Pages Posted: 24 May 2005
Date Written: January 2005
We examine how globalization affects firms' incentives to provide general worker training. We consider a three-stage game. In stage 1, firms invest in productivity-enhancing training. In stage 2, they can make wage offers for each others' workers. Finally, Cournot competition takes place. When two product markets become integrated, that is, replaced by a market with greater demand and more firms, training by each firm increases, provided the two markets are sufficiently small. When barriers between large markets are eliminated, training is reduced. Integration increases welfare if it does not reduce training. However, for large parameter regions, welfare falls if integration reduces training. We also show that opening markets to countries with publicly funded training or cheap, low-skilled labor can threaten apprenticeship systems.
Keywords: General worker training, human capital, oligopoly, turnover, globalization
JEL Classification: D42, L22, L43, L92
Suggested Citation: Suggested Citation