Labour Contracts and Efficiency in on-the-Job Training
Abstract
Two sources of inefficiency in the provision of on-the-job training are examined: an externality between firms which arises if there is imperfect competition between firms in the labour market, and allocation inefficiency due to asymmetry of information about the value of the trained worker. The second source of inefficiency may compound the first. Various contracts between the worker and the training firm are considered. Analysis of a simple example suggests that a contract in which the wage is chosen by the firm performs best, according to the criteria of reducing both types of inefficiency.
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Labor economists have documented that some training investment occurs because labor market imperfections such as wage compression, information asymmetries, and monopsony power can make general training investment privately rational under certain conditions.
“Labor economists have documented that despite this market failure, some training investment occurs because labor market imperfections (wage compression, information asymmetries, monopsony power) can make general training investment privately rational under certain conditions (Acemoglu & Pischke, 1998;Stevens, 1994).”
From The Tragedy of the Cognitive Commons: How AI Could Disrupt the Regeneration of Professional Expertise (2026) · cites this paper as Stevens, 1994
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Lovett, N. (2026) · Human Resource Development Review · doi:10.1177/15344843261470602 · Cited by 7 · see citing works
- Authors
- Stevens, M.
- Affiliations
- University of Oxford (GB)
- Corresponding author
- Stevens, Margaret
- Venue
- The Economic Journal
- Publisher
- Oxford University Press (OUP)
- Published
- 1994-03
- Volume
- 104
- Issue
- 423
- Pages
- 408
- ISSN
- 0013-0133 (ISSN-L)
- OpenAlex
- W2097448236
- Cited by
- 53
- References
- 0
- Citations by year
- 2026: 1 · 2024: 1 · 2021: 2 · 2020: 1 · 2019: 1 · 2018: 3 · 2017: 1 · 2016: 1 · 2012: 4
- FWCI
- 3.90
- Type
- journal article
- Language
- en
- Open access
- closed
- Locations
- The Economic Journal (publishedVersion)
- Oxford University Research Archive (ORA) (University of Oxford) (acceptedVersion)
- RePEc: Research Papers in Economics (submittedVersion)
- Topics
- Social Sciences › Economics, Econometrics and Finance › Economics and Econometrics › Labor market dynamics and wage inequality
- Social Sciences › Political Science and International Relations › Education and Labor Relations
- Social Sciences › Economics, Econometrics and Finance › Economics and Econometrics › Merger and Competition Analysis
- Keywords
- on-the-job training, employment contracts, training efficiency, externalities, imperfect competition, information asymmetry, wage contracts, employee training
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