On‐the-job specific training and efficient screening
Journal of Labor Economics
0734-306X (print)1537-5307 (online)
University of Chicago Press
681 - 701
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Please cite this item using this persistent URLhttp://hdl.handle.net/11693/49277
Employment relationships are governed by short‐term incomplete contracts and typically involve on‐the-job screening and firm‐specific training. This article studies a dynamic employment relationship with these features and identifies a potential conflict between the employer's twin objectives to screen and train the worker: when the training technology is quite productive, the employer may have to sacrifice from worker performance during the screening process. The article thus offers an explanation for why firms may invest suboptimally on training, which complements the standard “inappropriable rents” explanation based on ex post mobility of young employees.