Training, Turnover and Search

This paper explores a model of firm-specific training in a job search environment with labor turnover. The main substantive finding is a positive association between training and wages (when dispersed). The paper then precisely characterizes how both wage dispersion and firm profitability depend on the flow value b>=0 of workers' unmatched time. It is shown that: (i) for all high values b, no equilibrium exists; (ii) for intermediate values b, multiple equilibria arise, where firms earn zero profits, and choose from a general wage distribution; (iii) for all lower values b, there is a unique equilibrium, with firms earning positive profits, and choosing from an atomless set of wages