Collective versus segmentalist training system with a technology choice

This study develops a model to examine two training systems: collective, in which all firms choose a standard technology and contribute to and recruit from a common pool of workers with general skills; and segmentalist, in which all firms use their own technology and provide their employees with firm-specific training to secure skilled labor. This analysis demonstrates how a collective training system requires firms to collaborate well. This can occur only under certain conditions, which yields multiple equilibria, thus implying that a segmentalist training system can potentially occur when the collective training system takes place. This study compares the social welfare between equilibria and examines the possibility of welfare-improving reforms that transform a segmentalist training system into a collective one. The findings may have implications for recent trends in the Japanese training system.