Research Paper Center for Economic Research Discussion Paper: Tilburg University 2007-48
Performance pay, training and labor mobility
01 Jul 2007
Market imperfections may cause firms and workers to under-invest in specific training. This paper shows that profit sharing may be a suitable instrument to enhance specific training investments, either by enhancing wage ?exibility or by increasing the returns to training. As a result, profit sharing not only increases productivity by means of an effort effect, but also by increased training investments. Furthermore, the results suggest that older workers' employability can be improved if a profit-related remuneration is paid.