On-the-job-training, job search and job mobility JOSEF ZWEIMÜLLER* and RUDOLF WINTER-EBMER** JEL classification: J63, J24 Keywords: firm-specific training, on-the-job-search, turnover 1. INTRODUCTION This paper analyzes the impact of firm-specific training on job mobility. While many re- cent studies have looked at the impact of on-the-job training on level and growth of wages, the impact of training on employee turnover has received far less attention. 1 This is surprising since it is widely acknowledged that training is a potentially important determinant not only of wages but also of labor market outcomes in general. The theory of human capital, developed by BECKER (1964), distinguishes general and firm-specific training. By definition, the former is applicable in all firms, whereas the lat- ter is productive only within a particular firm. This distinction has important implica- tions for the financing of training: in its strict form, firms will be reluctant to finance gen- eral training, because workers can reap the rewards of training in any firm. 2 Likewise, this distinction has also consequences for job mobility. While investments in general training may induce a worker to search more actively for a new job, specific training in- vestments may induce a worker to stay with the current firm. The role of training for la- bor market turnover is also highly relevant from the point of view of economic policy. With respect to specific training, the threat of termination of the employment relation- ship may lead to underinvestment. For obvious reasons, it is important to know to which extent specific training reduces job search and actual job separations. In contrast, gen- eral training could increase the mobility of the workers and thus enhance the flexibility University of Zurich, CEPR, CESifo and IZA. University of Linz, IHS, CEPR and IZA. Thanks to Johannes Binswanger for excellent research assistance, to Steve Pischke and seminar participants at Linz for valuable comments. This research has been supported by the Austrian Science Funds (FWF) and by the European Commission under the TSER program PL980182 for the PURE project. The views in this paper are not necessarily those of the associated institutions. 1. For a comprehensive survey on the impact of training on labor market outcomes, see BISHOP (1997). 2. See ACEMOGLU and PISCHKE (1999) for some qualifications to this hypothesis in the case of im- perfect labor markets. Schweiz. Zeitschrift für Volkswirtschaft und Statistik 2003. Vol. 139(4)563-576