DP3468 Does Poaching Distort Training?

Author(s): Espen R Moen , Asa Rosen

Publication Date: July 2002

Keyword(s): matching , training , poaching , efficiency

JEL(s): J24 , J41 , J63 , J64

Programme Areas: Labour Economics

Link to this Page: www.cepr.org/pubs/dps/DP3468.asp

We analyse the efficiency of the labour market outcome in a competitive search equilibrium model with endogenous turnover and endogenous general human capital formation. We show that search frictions do not distort training decisions if firms and their employees are able to coordinate efficiently, for instance, by using long-term contracts. In the absence of efficient coordination devices there is too much turnover and too little investments in general training. Nonetheless, the number of training firms and the amount of training provided are constrained optimal, and training subsidies therefore reduce welfare.