Abstract
Training workers generates adverse selection when there is ex-ante asymmetric information about the workers’ learning abilities. Under-provision of training arises from the firm’s attempt to mitigate the quality of “lemons” in the post-training adverse selection problem. With moral hazard in production, the optimal incentive contracts induce efficient production by untrained workers, but the improved productivities of trained workers are generally under-exploited. A shift in the distribution toward more high learning ability workers can worsen inefficiency, with the firm possibly training less workers than before.
Talk to us
Join us for a 30 min session where you can share your feedback and ask us any queries you have
Disclaimer: All third-party content on this website/platform is and will remain the property of their respective owners and is provided on "as is" basis without any warranties, express or implied. Use of third-party content does not indicate any affiliation, sponsorship with or endorsement by them. Any references to third-party content is to identify the corresponding services and shall be considered fair use under The CopyrightLaw.