Kiel Working Papers, Kiel Institute for World Economics
No 1372:
Institutions and Training Inequality
Wolfgang Lechthaler and Dennis J. Snower
Abstract: We analyze the interaction among important institutional
variables in the labor market (firing costs, minimum wages and unemployment
benefits) in determining firm-provided training. We find that the
institutional interactions - specifically, their degree of complementarity
and substitutability - depends on employees' abilities. On this account,
the institutional interactions influence skills inequality. We derive how
the influence of one of the institutional variables above is affected by
other institutional variables with respect to inequality skills arising
from firm-provided training. We derive several striking results, such as:
(a) the minimum wage and unemployment benefits generate increasing skills
inequality whereas firing costs generate diminishing skills inequality; (b)
unemployment benefits and firing costs are complements in their effects on
skills disequalization, (c) firing costs and the minimum wage are
complements in their effects on skills equalization, and (d) unemployment
benefits and the minimum wage are substitution in their effects on skills
inequality.
Keywords: Firm Training, Skills Inequality, Institutions; (follow links to similar papers)
JEL-Codes: H32,; J24; (follow links to similar papers)
24 pages, July 2007
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