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Innovation, Human Capital Destruction and Firms’ Investment in Training
Author(s) -
Carillo Maria Rosaria,
Zazzaro Alberto
Publication year - 2000
Publication title -
the manchester school
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.361
H-Index - 42
eISSN - 1467-9957
pISSN - 1463-6786
DOI - 10.1111/1467-9957.00197
Subject(s) - obsolescence , pace , economics , human capital , investment (military) , welfare , training (meteorology) , microeconomics , industrial organization , technological change , physical capital , business , market economy , marketing , macroeconomics , physics , geodesy , politics , meteorology , political science , law , geography
We analyse the effect of human capital obsolescence due to the introduction of technological innovations on the long‐run growth rate, and show that in equilibrium the pace of technical change may be faster than is socially optimal. In such cases, the existence of market imperfections, and their costs for firms, may improve the welfare for the society as a whole. In particular, we assume that firms do not have full information on workers’ skills but can arrange some form of internal training that permits them to acquire the lacking information. Training costs reduce research and development investments by firms and in this way draw the market equilibrium closer to the social optimum.