Abstract
The paper examines the optimal level of training investment when trained workers are mobile, wage contracts are time-consistent, and training comprises both specific and general skills. The firm has ex post monopsonistic power that drives trained workers' wages below the social optimum. The emergence of a trade union bargaining at the firm-level can increase social welfare, by counterbalancing the firm's ex post monopsonistic power in wage determination. Local union-firm wage bargaining ensures that the post-training wage is set sufficiently high to deter at least some quits, so that the number of workers the firm trains is nearer the social optimum.
Original language | English |
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Pages (from-to) | 328-343 |
Number of pages | 16 |
Journal | Economic Journal |
Volume | 108 |
Issue number | 447 |
DOIs | |
Publication status | Published - Mar 1998 |