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Institutions and training inequality

Author

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  • Lechthaler, Wolfgang
  • Snower, Dennis J.

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.

Suggested Citation

  • Lechthaler, Wolfgang & Snower, Dennis J., 2007. "Institutions and training inequality," Kiel Working Papers 1372, Kiel Institute for the World Economy (IfW Kiel).
    • Handle: RePEc:zbw:ifwkwp:1372
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    References listed on IDEAS

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    1. DiNardo, John & Fortin, Nicole M & Lemieux, Thomas, 1996. "Labor Market Institutions and the Distribution of Wages, 1973-1992: A Semiparametric Approach," Econometrica, Econometric Society, vol. 64(5), pages 1001-1044, September.
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    4. Orszag, Mike & Snower, Dennis J., 1998. "Anatomy of Policy Complementarities," CEPR Discussion Papers 1963, C.E.P.R. Discussion Papers.
    5. Orszag, Mike & Snower, Dennis J., 1998. "Anatomy of policy complementarities," Open Access Publications from Kiel Institute for the World Economy 2252, Kiel Institute for the World Economy (IfW Kiel).
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    13. repec:hhs:iuiwop:500 is not listed on IDEAS
    14. Lechthaler, Wolfgang & Snower, Dennis J., 2008. "Minimum wages and training," Labour Economics, Elsevier, vol. 15(6), pages 1223-1237, December.
    15. Barro, Robert J., 1977. "Long-term contracting, sticky prices, and monetary policy," Journal of Monetary Economics, Elsevier, vol. 3(3), pages 305-316, July.
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    17. Andrea Bassanini & Romain Duval, 2006. "Employment Patterns in OECD Countries: Reassessing the Role of Policies and Institutions," OECD Social, Employment and Migration Working Papers 35, OECD Publishing.
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    Cited by:

    1. Gilbert L. Skillman, 2022. "The Nash bargaining solution in labor market analysis," Metroeconomica, Wiley Blackwell, vol. 73(3), pages 884-899, July.
    2. Thomas RUTHERFORD, 2009. "Stochastic Programming in a Complementarity Format: Tools and Sample Applications," EcoMod2009 21500079, EcoMod.

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    More about this item

    Keywords

    Skills Inequality; Institutions; Firm Training;
    All these keywords.

    JEL classification:

    • H32 - Public Economics - - Fiscal Policies and Behavior of Economic Agents - - - Firm
    • J24 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Human Capital; Skills; Occupational Choice; Labor Productivity

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