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General Human Capital as a Shared Investment under Asymmetric Information

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  • Shin-Hwan Chiang
  • Shih-Chen Chiang

Abstract

This paper examines the firm's optimal wage and layoff policies in situations where only general training is provided and the firm providing training has an advantage in information over other firms. The asymmetric information among firms creates adverse selection that seriously impairs the mobility of labor and consequently affects the firm's optimal policies. General human capital is shown to have the same layoff and cost-sharing implications as firm-specific human capital. Furthermore, the contracts prespecifying rigid wages are proven to be optimal.

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  • Shin-Hwan Chiang & Shih-Chen Chiang, 1990. "General Human Capital as a Shared Investment under Asymmetric Information," Canadian Journal of Economics, Canadian Economics Association, vol. 23(1), pages 175-188, February.
    • Handle: RePEc:cje:issued:v:23:y:1990:i:1:p:175-88
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    Cited by:

    1. Valentina Tartari & Francesco Di Lorenzo & Benjamin A. Campbell, 2020. "“Another roof, another proof”: the impact of mobility on individual productivity in science," The Journal of Technology Transfer, Springer, vol. 45(1), pages 276-303, February.
    2. C. Simon Fan & Xiangdong Wei, 2010. "Training and worker effort: a signalling perspective," Canadian Journal of Economics/Revue canadienne d'économique, John Wiley & Sons, vol. 43(2), pages 604-621, May.
    3. Rao, Neel, 2015. "General training in labor markets: Common value auctions with unobservable investment," Journal of Economic Behavior & Organization, Elsevier, vol. 120(C), pages 19-45.
    4. Anke S. Kessler & Christoph Lülfesmann, 2006. "The Theory of Human Capital Revisited: on the Interaction of General and Specific Investments," Economic Journal, Royal Economic Society, vol. 116(514), pages 903-923, October.
    5. Pablo Doucet & Ignacio Requejo & Isabel Suárez-González, 2024. "Business groups’ internal labour markets and SME labour productivity," Small Business Economics, Springer, vol. 62(2), pages 707-725, February.
    6. Benjamin A. Campbell, 2013. "Earnings Effects of Entrepreneurial Experience: Evidence from the Semiconductor Industry," Management Science, INFORMS, vol. 59(2), pages 286-304, February.
    7. Tobias Hiller, 2023. "Training, Abilities and the Structure of Teams," Games, MDPI, vol. 14(3), pages 1-8, May.
    8. Russell W. Coff, 1999. "When Competitive Advantage Doesn't Lead to Performance: The Resource-Based View and Stakeholder Bargaining Power," Organization Science, INFORMS, vol. 10(2), pages 119-133, April.

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