Investment in General Training with Consensual Layoffs

Economics

Speaker:Guilio Fella, Queen Mary and Westfield College
Date: Friday 20 October 2000
Time: 16:15
Location: Room 106 Streatam Court

Further details

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.