Scandinavian Working Papers in Economics

Memorandum,
Oslo University, Department of Economics

No 35/2002: Wage Differentiation via Subsidised General Training

V. Bhaskar and Steinar Holden ()
Additional contact information
V. Bhaskar: University of Essex, Postal: Wivenhoe Park, Colchester CO4 3SQ, United Kingdom
Steinar Holden: Dept. of Economics, University of Oslo, Postal: Department of Economics, University of Oslo, P.O Box 1095 Blindern, N-0317 Oslo, Norway

Abstract: We provide a new explanation for why firms pay for general training in a competitive labor market. If firms are unable to tailor individual wages to ability, for informational or institutional reasons, they will pay for general training in order to attract better quality workers. The market provision of training may well exceed the first best level. Our explanation relies on wage compression within skill categories, while imperfect competition based explanations for firm subsidised general training rely on wage compression across skill categories.

Keywords: competitive labor market; general training

JEL-codes: D82; J31

26 pages, June 19, 2003

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