Although wage rigidity is among the most prominent subjects in
modern economics, its effects on wage compression and firm training
have thus far not been considered.
This paper is trying to bridge this gap by using a simple two period
model which can still by analyzed analytically. I am able to show
that wage rigidity increases wage compression. However, contrary to
previous work this is not sufficient to increase firms' training
investments. The reason lies in the endogeneity of separations,
which become more frequent.
- Human Capital
- Wage Rigidity