"Many economists question the need for social intervention in training, arguing that the benefits accruing to employers and employees create sufficient incentive for private financing. Research findings indicate that in practice this means depending on employers because it is they who pay for the bulk of employee training, even when the skills being taught are useful at other firms. Yet in practice, private incentives for on-the-job learning and training do not currently generate broader results that are in the public interest. This chapter looks at the theoretical and empirical evidence of market failure in training provisions. It argues that the training market in the United States is failing to provide a socially optimal quantity and quality of employer training. Specifically, it examines four potential sources of market failures: real externalities, tax-induced distortions, liquidity constraints, and government regulatory interventions that discourage training. Each of them are found to operate to some degree in some training markets."
Available at: http://works.bepress.com/john_bishop/97/