Promotion, turnover, and discretionary human capital acquisition

David Scoones, Dan Bernhardt

Research output: Contribution to journalArticle

Abstract

This article explores human capital acquisition decisions when job placement helps determine competition for a worker. With asymmetric information, workers may invest in firm-specific capital without long-term contracts. Specific investment increases promotion chances (and hence wage competition), shifting competition back to a time when firms are symmetrically uninformed. If general human capital is the efficient (output-maximizing) investment, then an equivalent firm-specific investment maximizes expected career wages. This is a general result for sellers in second-price auctions: sellers (of labor) invest to maximize the expected second-highest bidder valuation (wage), not the winner's expected valuation.

Original languageEnglish (US)
Pages (from-to)122-141
Number of pages20
JournalJournal of Labor Economics
Volume16
Issue number1
DOIs
StatePublished - Jan 1998

ASJC Scopus subject areas

  • Industrial relations
  • Economics and Econometrics

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