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Investment in General Training with Consensual Layoffs

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  • Giulio Fella

    (Queen Mary, University of London)

Abstract

We study non-contractible firms' investment in general training in a model of frictional unemployment. Since training is vested in workers, firms' return to training is zero when a match ends. Consensual layoff provisions or large severance payments oblige firms to bargain efficiently over the joint payoff from separation. This increases employers' incentives to train as they share workers' outside return to general human capital. The result generalizes to all types of general investment that are vested in the non-investing party on separation. We also show that, independently from underinvestment in training, the laissez-faire equilibrium is always inefficient for any given level of investment.

Suggested Citation

  • Giulio Fella, 2014. "Investment in General Training with Consensual Layoffs," Working Papers 418, Queen Mary University of London, School of Economics and Finance.
    • Handle: RePEc:qmw:qmwecw:418
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    File URL: https://www.qmul.ac.uk/sef/media/econ/research/workingpapers/2000/items/wp418.pdf
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    References listed on IDEAS

    as
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    More about this item

    Keywords

    Consensual layoffs; General training; Matching;
    All these keywords.

    JEL classification:

    • J24 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Human Capital; Skills; Occupational Choice; Labor Productivity
    • J63 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Turnover; Vacancies; Layoffs
    • J65 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Unemployment Insurance; Severance Pay; Plant Closings

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