Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/21160
Authors: 
Zoega, Gylfi
Francesconi, Marco
Booth, Alison L.
Year of Publication: 
2002
Series/Report no.: 
IZA Discussion paper series 618
Abstract: 
In oligopsonistic labour markets, firms have some market power, and a wedge is created between wages and marginal product. When oligopsonistic firms' production technology requires generally trained workers, firms may therefore receive part of the returns to general training and be willing to pay for it despite its general nature. However this outcome is not efficient, in the sense that too few workers are trained and workers who are hired receive too little training. We consider how different institutions can affect this inefficiency. Industry-level minimum wages can remove the training inefficiency and provide workers with the right incentives to invest in general training. A training subsidy to firms can also be used to achieve first-best. Trade unions might also remedy the market failure, in two ways. First, if an industry-wide union has a direct say in the training decision and maximises the utility of a representative worker, it will choose the efficient level of training intensity. Second, firmspecific unions, through raising relative wages and reducing turnover, can increase training intensity.
Subjects: 
training
oligopsony
unions
minimum wages
JEL: 
E32
J23
J24
J54
Document Type: 
Working Paper

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