You run a company, GizmoNet, that produces gizmos. Gizmos hook onto Nintendo Game Boys (hand-held electronic game players), allowing users to access the Internet using wireless communication protocols. Thus, they turn Game Boys into hand-held web browsers. Your company hires software engineers, who are employed for three periods. In period one, they must train at the company. In this period their total productivity is $10M (million), and training costs are $8M. In periods two and three (after the training), productivity is $17M and $19M, respectively. An engineer who received no training would have productivity of $10M at any other firm in all three periods.
Engineers can quit after the training (and always get a job offer at other firms). If they do so, their productivity at other firms is $2M lower than at GizmoNet in each of the last two periods. Assume no discounting.
a) Is the training a good investment? Is it general or firm-specific human capital? Explain.