Career Concerns and Firm – Sponsored General Training

This paper studies the provision of firm-sponsored general training in the presence of workers’ career concerns. We use a model building on the argument that the acquisition of general skills increases the worker’s bargaining power vis-a-vis the employer. In this context, we show that the worker’s implicit incentives to provide effort increase with the level of acquired general training. The employer takes this reciprocal effect into account and is thus more willing to invest in general human capital in the first place. When the positive effect of training on worker’s incentives is strong enough, the equilibrium outcome may even involve overinvestment in general training. It is also shown that a sharper increase in worker’s power associated with additional training may strengthen the employer’s investment incentives and have beneficial effects on welfare.