Who should invest in specific training?
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We study experimentally whether employers or workers should invest in specific training. Workers have an alternative trading opportunity that takes the form of either an outside option or a threat point. Theory predicts that with outside options, employers have (weakly) better investment incentives than workers do and should therefore be the investing party. With threat points, employers and workers are predicted to invest the same. Our results are, by and large, in line with these predictions. Due to offsetting inefficiencies in the bargaining stage, however, realized inefficiencies are remarkably similar across the different situations considered.
KeywordsSpecific training Investments Experiments
JEL classificationJ41 J24 C91
We gratefully acknowledge the useful remarks of three anonymous referees, which improved the presentation of the material considerably.
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