The Library

Economic integration and human capital investment

Tools

Ireland, Norman J. and Merzoni, Guido S. (1999) Economic integration and human capital investment. Working Paper. Coventry: University of Warwick, Department of Economics. Warwick economic research papers (No.534).

Preview

PDF
WRAP_Ireland_twerp534.pdf - Requires a PDF viewer such as GSview, Xpdf or Adobe Acrobat Reader
Download (96Kb)

Official URL: http://www2.warwick.ac.uk/fac/soc/economics/resear...

Abstract

In this paper we seek to characterise a market for heterogeneous managers created by heterogeneous firms and the decisions on investment in both sector-specific and firm-specific human capital when those decisions are made prior to the realisation of firms' profitability and the degree of markets’ integration may vary. We consider the (Nash) equilibrium and relate this to a first-best allocation. The rent-seeking motives of managers and firms will generally make sector- and firm-specific investment decisions not socially optimum, both with respect to the number of investors and the level of each investment. The effect on welfare of markets’ integration varies with the nature of the skills considered. With more general, sector-specific, skills more integration, by increasing the matching ability of the market, reduces the distortion caused by rent-seeking, and increases social welfare. However, with more specific skills the increased matching ability of a more integrated market, by making managers more mobile, destroys some firm-specific human capital and so reduces welfare.

Item Type:

Working or Discussion Paper (Working Paper)

Subjects:

H Social Sciences > HD Industries. Land use. Labor > HD28 Management. Industrial Management
H Social Sciences > HD Industries. Land use. Labor

Divisions:

Faculty of Social Sciences > Economics

Library of Congress Subject Headings (LCSH):

Executives, Human capital, Employees -- Recruiting, Investments

Series Name:

Warwick economic research papers

Publisher:

University of Warwick, Department of Economics

Place of Publication:

Coventry

Official Date:

1 December 1999

Dates:

Date	Event
1 December 1999	Published

Number:

No.534

Number of Pages:

Status:

Not Peer Reviewed

Access rights to Published version:

Open Access

Funder:

Consiglio nazionale delle ricerche (Italy) (CNR)

Grant number:

97.05251.ST74 (CNR)

References:

Acemoglu, D. (1996) “Credit constraints, investment externalities and growth” in Booth, A. and D. Snower (eds.) “Acquiring Skills. Market failures, their symptoms and policy responses”, Cambridge, CEPR and Cambridge University Press.
Becker, G. (1962) "Investment in Human Capital: A Theoretical Analysis", Journal of Political Economy, vol.70, Suppl. pp.9-49.
Bennett, E. (1988) "Consistent Bargaining Conjectures in Marriage and matching", Journal of Economic Theory, vol.45,pp.392-407.
Burdett, K. and E. Smith (1996) “Education and matching externalities” in Booth, A. and D. Snower (eds.) “Acquiring Skills. Market failures, their symptoms and policy responses”, Cambridge, CEPR and Cambridge University Press.
Crawford, V. and E. Knoer (1981) "Job Matching with Heterogeneous Firms and Workers", Econometrica, vol.49, pp.437-450.
Chang, C. and Y. Wang (1996) "Human Capital Investment under Asymmetric Information: The Pigovian Conjecture Revisited." Journal of Labour Economics, vol.14, pp.505-519
Conyon, M. and D. Leech (1994) "Top Pay, Company Performance and Corporate Governance", Oxford Bulletin of Economics and Statistics, vol.56, n.3, pp.229-247.
Felli, L. and C. Harris (1996) "Learning, Wage Dynamics, and Firm-Specific Human capital", Journal of Political Economy, vol.104, pp.838-868.
Grossman, S. and O. Hart (1986) "The Cost and Benefits of Ownership: A Theory of Vertical and Lateral Integration", Journal of Political Economy, vol.94, pp.691-719.
Hart, O. and J. Moore (1990) "Property Rights and the Nature of the Firm", Journal of Political Economy, vol.98, pp.1119-1158.
Jensen, M. and Murphy, J. (1990) "Performance Pay and Top-Management Incentives", Journal of Political Economy, vol.98, pp.225-264.
Jovanovic, B. (1979) "Firm-specific Capital and Turnover", Journal of Political Economy, vol.87, n.6, pp.1246-1260.
Marshall, A. (1920) "Principles of Economics", 8th edition, London, Macmillian.
McLaughlin, K. (1994) "Rent Sharing in an Equilibrium Model of matching and Turnover", Journal of Labour Economics, vol.12, pp.499-523.
Mincer, J. (1962) "On-the-job Training: Costs, Returns, and Some Implications", Journal of Political Economy, vol.70, n.5, pp.50-79.
Pigou, A. C. (1912) “Wealth and Welfare”, London, Macmillan.
Rochford, S. (1984) "Symmetrically Pairwise-Bargained Allocations in an Assignment Market", Journal of Economic Theory, vol.34, pp.262-281.
Shapley, L. and M. Shubik (1972) "The Assignment Game I: the Core", International Journal of Game Theory, vol.1, pp.111-130.
Stevens, M. (1996) “Transferable training and poaching externalities” in Booth, A. and D. Snower (eds.) “Acquiring Skills. Market failures, their symptoms and policy responses”, Cambridge, CEPR and Cambridge University Press.