Human Capital and On the Job Training : Under Investment by Firms and Its Educational Consequences

A common assumption in literature dealing with the lifecycle profile of human capital is that individuals decide every period on the investment in their human capital, i.e., schooling and training. However, in many cases training is a decision made by the employer rather than the employee. This study constructs a lifecycle profile of human capital assuming that individuals decide on investment in schooling, but employers decide on investment in training in latter periods. A shorter time horizon for employers leads to underinvestment in training, which leads to underinvestment in schooling. Policy implications and other contributions of this model are discussed