Human Capital Creates Insider Power


Muysken, Joan ; Zwick, Thomas


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URL: http://ub-madoc.bib.uni-mannheim.de/627
URN: urn:nbn:de:bsz:180-madoc-6274
Document Type: Working paper
Year of publication: 1999
Publication language: English
Institution: Sonstige Einrichtungen > ZEW - Leibniz-Zentrum für Europäische Wirtschaftsforschung
MADOC publication series: Veröffentlichungen des ZEW (Leibniz-Zentrum für Europäische Wirtschaftsforschung) > ZEW Discussion Papers
Subject: 330 Economics
Classification: JEL: J24 J41 ,
Subject headings (SWD): Arbeitslosigkeit , Humankapital , Insider-Outsider-Theorie
Abstract: This paper demonstrates that insiders can erect barriers to entry and skim rents by sinking costs in human capital when labour markets are otherwise perfectly contestable. The sunk costs nature of human capital investments may result from the need to satisfy ever increasing specialised skill requirements in our society. When outsiders can not threat with market entry, insiders invest inefficiently in human capital such that their rent share is maximized. This inefficiency results from the hold-up problem that arises since workers are not residual claimants of the human capital rents. On the other hand, since insiders' investments are negatively correlated with the number of workers, this may lead to higher than efficient investments nevertheless. When outsiders have an effective entry threat, insiders are forced to accept higher employment of outsiders and share the reduced rents with them. However, full employment is not necessarily reached and in any case investments are higher and social rent is lower than optimal.
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Das Dokument wird vom Publikationsserver der Universitätsbibliothek Mannheim bereitgestellt.




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Muysken, Joan ; Zwick, Thomas (1999) Human Capital Creates Insider Power. Open Access [Working paper]
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