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2010 Documento de Trabajo #266

Firm-Provided Training and Labor Market Institutions

This paper studies firm-provided training in the presence of the following labor market institutions: minimum wages, assistance unemployment benefits, firing costs, unions and severance payments. It shows that minimum wages, severance payments and unemployment benefits may either increase or decrease firm-provided training relative to a competitive labor market benchmark where firm-provided training takes place. In contrast, training incidence should be greater when firing costs are higher and there is more unionization.The paper argues that the large observed cross-country heterogeneity in labor market institutions is a plausible candidate to explain the large observed variation in training incidence across different countries, workers and industries. The reason is that the effect of any institution on firm-provided training depends crucially on the other institutions in placed.

Felipe Balmaceda