General versus Specific Skills in Labor Markets with Search Frictions and Firing Costs
- (pp. 811-831)
Abstract
Human capital investments are not independent of the aggregate state of labor markets: frictions and slackness of the labor market raise the returns to specific human capital investments relative to general investments. We build a macroeconomic model with two pure strategy regimes. In the pure G-regime, workers invest in general skills. This occurs when they face high turnover labor markets and in the absence of employment protection. The pure 5-regime in which workers invest in skills specific to their job appears when employment protection is high enough. Implications for a characterization of Europe-United States differences are provided in conclusion. (JEL: J63, J30)Citation
Wasmer, Etienne. 2006. "General versus Specific Skills in Labor Markets with Search Frictions and Firing Costs." American Economic Review, 96 (3): 811-831. DOI: 10.1257/aer.96.3.811JEL Classification
- J41 Labor Contracts
- O33 Technological Change: Choices and Consequences; Diffusion Processes