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Firm-Specific Training and Contract Length

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  • Cantor, Richard

Abstract

Wages subject to continuous renegotiations provide inefficient incentives for the creation of firm-specific human capital if training requires both firm investment and worker effort. Noncontingent career-long, fixed-wage contracts do not induce efficient levels of training because they award all the quasi-rents from training to the firm, leaving no incentive for trainee effort. Intermediate-length, fixed-wage contracts with known expiration dates can improve training incentives. During the life of the contract, all the quasi-rents accrue to the firm, but the trainee puts forth effort because he can appropriate future rents after the contract expires. Copyright 1990 by The London School of Economics and Political Science.

Suggested Citation

  • Cantor, Richard, 1990. "Firm-Specific Training and Contract Length," Economica, London School of Economics and Political Science, vol. 57(225), pages 1-14, February.
    • Handle: RePEc:bla:econom:v:57:y:1990:i:225:p:1-14
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    Cited by:

    1. Malcomson, James M. & Maw, James W. & McCormick, Barry, 2000. "General training by firms, apprentice contracts, and public policy," Discussion Paper Series In Economics And Econometrics 0021, Economics Division, School of Social Sciences, University of Southampton.
    2. Danziger, Leif, 1995. "Discrete shocks and fixed duration of labor contracts," Labour Economics, Elsevier, vol. 2(4), pages 359-379, December.
    3. Burdett, Kenneth & Cunningham, Elizabeth J, 1998. "Toward a Theory of Vacancies," Journal of Labor Economics, University of Chicago Press, vol. 16(3), pages 445-478, July.
    4. Mohamed Ali Ben Halima, 2005. "The determinants for labour contract length A French micro-econometric study," Working Papers 0503, Groupe d'Analyse et de Théorie Economique Lyon St-Étienne (GATE Lyon St-Étienne), Université de Lyon.
    5. Malcomson, James M. & Maw, James W. & McCormick, Barry, 2003. "General training by firms, apprentice contracts, and public policy," European Economic Review, Elsevier, vol. 47(2), pages 197-227, April.
    6. Lindner, Axel, 1998. "Modelling the German system of vocational education," Labour Economics, Elsevier, vol. 5(4), pages 411-423, December.

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