Efficiency and sharing of investment in specific human capital under risk aversion |
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| Institution: | 1. Munich Center for the Economics of Aging (MEA) at the Max Planck Institute for Social Law and Social Policy, Amalienstraße 33, 80799 Munich, Germany;2. Technical University of Munich and National Bureau of Economic Research, Cambridge, MA, United States;3. Ostbayerische Technische Hochschule Regensburg, Seybothstraße 2, 93053 Regensburg, Germany;4. Research Centre for Education and the Labour Market (ROA), Maastricht University, Netherlands;1. Universidade de Vigo, CIM-Uvigo, Ourense, Spain;2. Università Degli Studi di Salerno, Fisciano, Italy;3. Universitat Politècnica de Catalunya, Barcelona, Spain;4. Universiteit Gent, Ghent, Belgium;1. School of Business, Jiangnan University, Wuxi 214122, China;2. Desautels Faculty of Management, McGill University, Montreal, Quebec H3A 1G5, Canada;1. Max Planck Institute for Demographic Research, Rostock, Germany;2. Leverhulme Centre for Demographic Science, Department of Sociology, University of Oxford, Oxford, United Kingdom;3. Population Research Unit, University of Helsinki, Helsinki, Finland;4. Department of Public Health Sciences, Stockholm University, Stockholm, Sweden;1. Department of Mechanical Engineering, University of Bath, Bath BA2 7AY, UK;2. Rotork plc, Brassmill Lane, Bath BA1 3JQ, UK |
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| Abstract: | This paper analyses the investment behavior of a risk-averse worker who searches for other jobs in a two-period model. It will be shown that given an appropriate investment technology, the worker will invest in specific human capital efficiently if his investment costs and return can be shared with some parties. The presence of sharing allows the worker to invest efficiently without being affected by his risk aversion since he can adjust his share of the investment in a way compatible with his attitude towards risk. |
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