Firm Financed Education and Specific Human Capital: A Test of the Insurance Hypothesis

This paper reports results from our continuing research on firm-financed education and training. Our work is motivated by Gary Becker’s formulation of general training as a public good that will not be provided by firms unless it is financed entirely by the trainees.3 So compelling was Becker’s model that for many economists the case was closed: if firms are observed to be paying, then either the training is not general or else their investment is being subsidized from trainees’ foregone wages or some other source. In place of this tautology we have been investigating whether, indeed, firms pay for training, and if so how those investments affect wages and turnover.