6 Firm Specific V. General Human Capital and Hold-up Problem 1. Consider the following scenario: (a) Worker per-period productivity without training (H): $10'000 (b) Bi-dimensional Training: Java and Accounting Law Increase in pro- ductivity due to training Z Java = $5,000, Z Accounting Law = $10,000 (c) Training is used at the current firm according to the following coef- ficients: a Java current firm = 0.1, a Accounting law = 0.9 (d) Direct cost of training and foregone production during training (C+F): $8'000 Ignore discounting for simplicity, and consider just 2 periods (training occurs today, and the worker is trained in period 2). Suppose that at an outside firm training is valued as follows: (a) outside firm=0.9, outside firm - 0 19, Accounting law U (b) The outside firm pays workers their full productivity Can you design a compensation scheme (wi, w2) such that the hold-up problem is resolved, and this valuable training opportunity is undertaken? Give an example, or show why you cannot. Would your answer change if the training in Java was fully general? 6 Firm Specific V. General Human Capital and Hold-up Problem 1. Consider the following scenario: (a) Worker per-period productivity without training (H): $10'000 (b) Bi-dimensional Training: Java and Accounting Law Increase in pro- ductivity due to training Z Java = $5,000, Z Accounting Law = $10,000 (c) Training is used at the current firm according to the following coef- ficients: a Java current firm = 0.1, a Accounting law = 0.9 (d) Direct cost of training and foregone production during training (C+F): $8'000 Ignore discounting for simplicity, and consider just 2 periods (training occurs today, and the worker is trained in period 2). Suppose that at an outside firm training is valued as follows: (a) outside firm=0.9, outside firm - 0 19, Accounting law U (b) The outside firm pays workers their full productivity Can you design a compensation scheme (wi, w2) such that the hold-up problem is resolved, and this valuable training opportunity is undertaken? Give an example, or show why you cannot. Would your answer change if the training in Java was fully general