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...

When creditors do not honor human capital as collateral, firms can mediate financially by offering workers long-term wage contracts. The optimal contract specifies a wage consisting of a spot general skill component plus a component equal to the expected time-averaged value of the worker's...

The authors introduce borrowing constraints into the life-cycle theory of labor supply and show that they account for observed profiles in consumption, earnings, and hours worked. They can also account for differences in occupational choice across individuals who differ in initial wealth,...