The probability that an unskilled worker can be successfully trained and or screened to be a manager depends on the effort of the firm. With positive hiring costs, a firm prefers to train/screen its own managers. However the optimal size of the firm for productive efficiency may conflict with...

This paper studies the supply and demand for on-the- job training when the success of training is stochastic, firms have to pay hiring costs when they hire skilled workers from the outside, and firms have strictly concave production functions. There are predictions about firm level dynamics and...