Essays on the Acquisition of Skills in Teams

University dissertation from Department of Economics, P.O. Box 7082, S-220 07 LUND

Abstract: This thesis consists of three theoretical essays on the acquisition of skills in teams. The first essay deals with the training and recruitment of football players in the European Soccer leagues. Before 1995, the transfer system entitled the ceding football club compensation from the acquiring football club when, on the expiry of his contract, the player in question moved to another club. In 1995, however, the European Court of Justice concluded that this system were contrary to the free movement of workers as decreed in the ECC Treaty. In the essay, it is argued that the abolition of the transfer fees probably increases the small teams’ costs of training and recruiting players. The smaller teams will sell their talent before the expiry of their contracts with the players, in order to bargain for a transfer fee from the recruiting team. Consequently, the quality of the leagues decreases. The second essay studies the hierarchy within a team. Law firms and other consulting firms traditionally use the up-or-out rule when training their junior employees. During the recent decades, however, large law firms has started to use the fast-track regime, where there is a fast track to promotion for some employees while others move laterally to a lower position in the firm. It is the purpose of the second essay to clarify when the up-or-out rule dominates the possibility to remain in the firm at a lower ranking. It is shown that the promotion mechanism generates a self-selection mechanism. In competitive markets where clients move between different firms, the employees’ outside possibilities differ, which results in the fast-track regime. When there is low competition between firms, clients seldom change firms, and the outside possibilities do not vary as much for the employees. This results in the up-or-out rule. The third and final essay considers a married couple that make non-cooperative investments in their human capital and allocate their time non-cooperatively between the household and the labour market. As time in the household can be regarded as production of family public goods, both their human-capital investments as well as their allocation of time will be inefficient. It is shown, however, that sharing of income can induce optimal behaviour. This could explain why marriage laws stipulate that spouses should support each other financially. Furthermore, the incentive constraint for optimal sharing becomes less restrictive when spouses possess similar productivity in the household.

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