Institutions and training inequality

Lechthaler, W. and Snower, Dennis (2012) Institutions and training inequality European Journal of Political Economy, 28 (1). pp. 88-104.

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We analyze how firm-provided training is affected by the interaction among important institutional variables in the labor market: firing costs, minimum wages and unemployment benefits. We find that the degree of complementarity and substitutability among these variables depends on employees' abilities. Thereby the institutional interactions influence skill inequality. We derive how the influence of one of the institutional variables above is affected by other institutional variables with respect to inequality in skills arising from firm-provided training. We derive several striking results, such as: (a) the minimum wage and unemployment benefits generate increasing skill inequality whereas firing costs generate skill equalization; (b) unemployment benefits and firing costs are complements in their effects on skill inequality, (c) firing costs and the minimum wage are substitutes in their effects on skill equalization, and (d) unemployment benefits and the minimum wage are substitutes in their effects on skill inequality. (C) 2011 Elsevier B.V. All rights reserved.

Document Type: Article
Additional Information: Kiel Inst World Econ, D-24105 Kiel, Germany. Univ Kiel, D-24118 Kiel, Germany. Lechthaler, W (reprint author), Kiel Inst World Econ, Hindenburgufer 66, D-24105 Kiel, Germany.
Keywords: Firm training Skill inequality Institutions minimum-wages labor-market policy
Research affiliation: OceanRep > The Future Ocean - Cluster of Excellence
Kiel University
ISSN: 0176-2680
Projects: Future Ocean
Date Deposited: 14 May 2014 09:51
Last Modified: 14 May 2014 09:51

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