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2008 Documento de Trabajo #252

Firm-Provided Training and Labor Market Policies

This paper studies firm-provided training in the presence of the following labor market policies: minimum wages, unemployment benefits, firing costs, and severance payments. I show that in high minimum wage economies, a more intense use of labor market policies reduces firm-provide training, while in low minimum wage economies, this may result in more training. The results of the paper are used to shed light on the relationship between the skill-premium and labor-market policies. In particular, I show that the skill premium is non-decreasing in the strictness of employment-protection legislation and non-increasing with the minimum wage and unemployment benefits.

Felipe Balmaceda