UNIONS AND EFFICIENT TRAINING

The paper examines the optimal level of training investment when train ed workers are mobile, wage contracts are time-consistent and training comprises both specific and general skills, The firm has ex post mono psonistic power that drives trained workers' wages below the social op timum. The emergence of a trade union bargaining at the firm-level can increase social welfare, by counterbalancing the firm's ex Post monop sonistic power in wage determination. Local union-firm wage bargaining ensures that the post-training wage is set sufficiently high to deter at least some quits, so that the number of workers the firm trains is nearer the social optimum.