Date: 26 Jan 2013

Law and economics of training: a taxonomy of the main legal and institutional tools addressing suboptimal investments in human capital development

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Economic literature has widely acknowledged the growing role of firm training in the knowledge economy. Training fosters labour productivity, boosts competitiveness, and strengthens firms’ capacity to innovate. This key role of training, however, raises relevant issues in terms of the optimal level of the corresponding investment. In fact firms that bear training costs may not be able to fully appropriate the relevant benefits. In addition training may facilitate structural changes and stimulate growth nationwide. Efficiency reasons thus justify the existence of legal and/or institutional tools, either voluntary or mandatory, aimed at addressing suboptimal investments in human capital development. The purpose of this study is to draw a systematic taxonomy of the main legal and institutional devices able to address the underlying inefficiencies of training investments. Training is on the top of the political agenda in many countries. The European Union is committed to increase adults’ participation in lifelong learning and to improve the quality of training programs and institutions. However, while training is of increasing political interest, a proper tool-box for policy makers is still missing.

I am grateful for useful comments and suggestions to the Editor, two anonymous referees, Michele Giuseppe Giuranno, Micheal Neugart, and seminar participants at the 6th Annual Conference of the Italian Society of Law & Economics held at the Free University of Bozen-Bolzano, on 9th–11th December 2010, and at the 28th Annual Conference of the European Association of Law & Economics held in Hamburg on 22nd–24th September 2011. Usual disclaimers apply.