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Abstract This paper analyzes the interaction between firms' investment in general skills training and workers' incentives. It shows that when a firm has an informational advantage over its workers, its provision of free general skills training can serve as a signal that there will be a long‐term relationship between the firm and its workers. This signal induces the workers to exert more effort in learning firm‐specific skills, which enhances the firm's profits. In contrast with most of the existing literature, the model implies that firms may provide free general skills training even if there is no labour market friction.

AbstractThis study applies newly developed methodologies to investigate the border effect between Hong Kong and mainland China. It makes three contributions to a better understanding of the border effect puzzle. First, the special relationship between mainland China and Hong Kong provides us with a unique opportunity to disentangle the factors underlying the observed border effect. Second, in addition to estimating the border effect between mainland China and Hong Kong, we also estimate that between the mainland provinces of Guangdong and Shanghai. This comparison between two types of border effects facilitates a better understanding of the extent of domestic market integration in China. Third, owing to the nature of our data and the new estimation approach we adopt, our estimated border effects are less subject to the measurement error‐related and estimation‐related biases commonly seen in previous studies. We find the estimated border effect between Hong Kong and mainland China to be approximately 266 km, which is substantially larger than that between Guangdong and Shanghai (1.3 km). Both are substantially smaller than the estimated border effects found in many previous studies.

The determinants of worker job satisfaction are estimated using a representative survey of three major cities in China. Legally segregated migrants, floaters, earn significantly less than otherwise equivalent non-migrants but routinely report greater job satisfaction, a finding not previously reported. We confirm a positive role for membership in the communist party but find that it exists only for non-migrants suggesting a club good aspect to membership. In contrast to earlier studies, many controls mirror those found in western democracies including the paradox of the contented female worker.

This paper posits that the provision of family friendly practices is, on balance, costly to firms and valuable to workers. As a consequence, we anticipate the emergence of a hedonic equilibrium in which workers provided with such practices face an implicit reduction in their earnings. Using WERS98 linked employer-employee data, we show that the ability to confirm this compensating wage differential depends critically on an appropriate treatment model designed to purge typical estimates of the income effect. We find that family friendly jobs may be associated with as much as a 20 percent reduction in earnings. Our estimates can be used to inform impact assessments of new UK legislation extending family friendly practices.