Career development and specific human capital collection

This paper is concerned with how firms provide workers with incentives to collect firm specific human capital when the skills collected cannot be contracted upon and where the worker is repaid for collecting skills by promotion. I consider two scenarios: (i) where the firm has private information on the worker's promotion prospects, and (ii) where there is symmetric uncertainty about the worker's promotion prospects. I show that the resolution to this incentive problem results in models of career development similar to those seen in Japan and the United States. I also discuss how differences in production methods and the role of an external labor market may help to explain observed differences in career development in Japan and the United States.