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Law and economics of training: a taxonomy of the main legal and institutional tools addressing suboptimal investments in human capital development

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Abstract

Economic literature has widely acknowledged the growing role of firm training in the knowledge economy. Training fosters labour productivity, boosts competitiveness, and strengthens firms’ capacity to innovate. This key role of training, however, raises relevant issues in terms of the optimal level of the corresponding investment. In fact firms that bear training costs may not be able to fully appropriate the relevant benefits. In addition training may facilitate structural changes and stimulate growth nationwide. Efficiency reasons thus justify the existence of legal and/or institutional tools, either voluntary or mandatory, aimed at addressing suboptimal investments in human capital development. The purpose of this study is to draw a systematic taxonomy of the main legal and institutional devices able to address the underlying inefficiencies of training investments. Training is on the top of the political agenda in many countries. The European Union is committed to increase adults’ participation in lifelong learning and to improve the quality of training programs and institutions. However, while training is of increasing political interest, a proper tool-box for policy makers is still missing.

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Notes

  1. The only application of a property rights solution is found in the labour market for professional football players before it was challenged by the European Court of Justice. In this market if a player's contract was still in force the transfer from a club to another one could only be carried out if the old club agreed to leave the player, no matter whether the player had actually complied with the legal period of notice or not. As a consequence a transfer fee was freely negotiated between the old club and a new one. After the contract had expired transfers could not be prevented by the old club, but National Football Associations set a transfer fee the club could demand. In the European Union however such a practice has been strongly limited further to a sentence of the European Court of Justice (European Court of Justice, 15th December 1995, case C-415/93, Union Royale Belge des Sociétés de Football Association ASBL and Others v Jean-Marc Bosman and Others). EU Commission appreciated this decision, arguing that before this trial football players market could be compared to a “system of slavery”, thus supporting the unlawfulness of assigning property rights to skills and abilities. On the other side the main football associations (FIFA and UEFA) claimed that transfer fees were a compensation for player's education costs plus the education costs for the talents which have not become professionals in accordance with a property right solution. Currently the legal regime of football players’ labour market allows transfer fees for valid contracts, but there are no transfer fees at all for expired contracts (Fees and Mulheuber 2002).

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Authors and Affiliations

  1. University of Bologna, Bologna, Italy

    Giulio Pedrini

  2. SDIC–School of Development Innovation and Change, Bologna, Italy

    Giulio Pedrini

  3. CRISP-Interuniversity Research Centre on Public Services, Bologna, Italy

    Giulio Pedrini

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  1. Giulio Pedrini
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Pedrini, G. Law and economics of training: a taxonomy of the main legal and institutional tools addressing suboptimal investments in human capital development. Eur J Law Econ 43, 83–105 (2017). https://doi.org/10.1007/s10657-013-9384-1

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